Emergency Credit Line Guarantee Scheme

The advent of COVID-19 severely impacted manufacturing and other types of businesses, especially in the MSME sector. To help the people running these businesses, the Indian government launched the Emergency Credit Line Guarantee Scheme (ECLGS) under the umbrella of Aatmanirbhar Bharat Abhiyaan.

What is the Emergency Credit Line Guarantee Scheme (ECLGS)?

To offset the financial loss incurred by businesses due to COVID-19, especially by Micro, Small, and Medium Enterprises (MSMEs), the government introduced this scheme. It involved providing them with additional funding of personal loan up to Rs. 3 lakh crores in the form of a fully guaranteed emergency credit line.

The scheme was launched to incentivise Member Lending Institutions (MLIs) to lend more money to MSME borrowers. These MLIs include Banks, Non-Banking Financial Companies (NBFCs) and Financial Institutions. The government gave them a full 100 percent guarantee for losses suffered by these institutions due to non-repayment by borrowers.

Expansion of Emergency Credit Line Guarantee Scheme

Here are the eligibility criteria that were established to avail credit using this scheme in different phases –

ECLGS 1.0:

The scheme was launched to primarily support individual loans for business purposes, Mudra (Micro Units Development and Refinance Agency) borrowers, business enterprises and MSME units that have outstanding loans up to Rs.50 crore.

ECLGS 2.0:

The authorities decided to extend this scheme to businesses belonging to 26 stressed sectors that have loans outstanding between ₹50 crore and ₹500 crore. 

ECLGS 3.0:

In this phase, this scheme also catered to sectors like hospitality, travel & tourism, leisure & sporting and civil aviation.

ECLGS 4.0:

This time, the authorities decided to extend loans for existing hospitals and Clinics/Medical units engaged in manufacturing of liquid oxygen, oxygen cylinders, etc.

Key Benefits of the Emergency Credit Line Guarantee Scheme (ECLGS)?

Helped Businesses Struggling With Cash Flow

The scheme gave much-needed financial aid to many businesses during the pandemic, thereby enabling the smooth functioning of business operations. 

Employment Generation

The scheme helped to deal with economic challenges by making it possible for many businesses to pay wages to their workers during the lockdown period.

Sector-Specific Support

As we saw above, the government helped those sectors which were most affected and the ones that were critical for the country’s safety and well-being.

Helped the Economy to Stay Afloat

Loan schemes like these reduced dependencies on imports by supporting domestic manufacturing. 

Features of Emergency Credit line Guarantee Scheme

Credit Line Amount

When the Emergency Credit Line Guarantee Scheme was launched, it aimed at providing a total of Rs. 3 lakh crores in the form of a fully guaranteed emergency credit line to businesses.

Fully Guaranteed Credit Line

The scheme provided Banks, NBFCs and Financial Institutions a 100 percent guarantee for any losses suffered by them due to non-repayment of loans under this scheme.

Read More: Why Opting For an NBFC Personal Loan is a Better Option?

Easy Access to Credit

Under this scheme, the lenders offered pre-approved loans to businesses with outstanding credit of up to Rs. 25 crore.


The loan scheme offered a four-year tenure with a one-year grace period on the principal amount.

Interest Rate

The Scheme enforced an personal loan interest rate cap of 9.25% for banks and financial institutions, and 14% for non-banking financial companies (NBFCs). 

Also Read: Why Opting For an NBFC Personal Loan is a Better Option?

How to Apply for Emergency Credit Line Guarantee Scheme?

Applying for the Emergency Credit Line Guarantee Scheme is a straightforward process designed to provide rapid financial assistance. Here’s how you can apply:

  • Contact Your Bank: Reach out to your bank or financial institution that is providing loans under ECLGS.
  • Submit Necessary Documents: Provide the required documents as specified by your bank.
  • Complete the Application: Fill out the application form provided by the bank, ensuring all details are accurate.
  • Await Approval: After submission, your application will be reviewed for eligibility, and you’ll be notified about the approval status.

Frequently Asked Question

Why Should You Know About The Emergency Credit Line Guarantee Scheme (ECLGS) Scheme?

Knowing about the ECLGS scheme is essential as it provides financial support to businesses during economic challenges, offering loans with favourable terms like low-interest rates and no collateral requirements.

What Is The Duration Of The ECLGS?

The loan tenure under ECLGS is 4 years.

Do I Have To Pay Any Processing Fee For Sanction Of Loans Under ECLGS?

No, one of the benefits of the ECLGS is that it does not require any processing fees for loan sanction.

Is Any Additional Collateral Required For The ECLGS Facility?

The ECLGS is designed to provide relief without the need for additional collateral, making it easier for businesses to access funds.

I Operate A Lending Business. Am I Eligible For The Emergency Credit Line Guarantee Scheme (ECLGS) Scheme?

The Emergency Credit Line Guarantee Scheme (ECLGS) was launched to primarily support Micro, Small and Medium Enterprises (MSMEs). You can get a loan as long as you fulfil its eligibility criteria. 

Why Should MSMEs Consider The ECLGS?

MSMEs should consider the ECLGS as it offers a financial cushion with favourable terms, helping them manage cash flow during tough economic times and aiding in sustaining their operations.

What Would Be The Guarantee Of Coverage Under The ECLGS Scheme?

The scheme extends loans to all the sectors of the economy. You can know more about the guarantee of coverage from the Member Lending Institution where you would apply for the loan.

Is There A Moratorium Period That The ECLGS Scheme Mandates?

The ECLGS scheme includes a one-year moratorium period on the principal amount.

What Will Be The Security On Credit Extended Under Gecl Scheme?

The loans provided under ECLGS are collateral-free.

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