Emergency Credit Line Guarantee Scheme Extended by Three Months

The government extended the Emergency Credit Line Guarantee Scheme (ECLGS) validity, including the ECLGS 1.0, ECLGS 2.0 and ECLGS 3.0, till 30.06.2021 or until the issuance of guarantees of the amount of Rs.3 lakh crore. The government also extended the last date of disbursement under ECLGS to 30.09.2021.

The government extended the scope of the ECLGS by introducing the ECLGS 3.0. The ECLGS 3.0 covers business enterprises in the travel, tourism, hospitality, leisure and sporting sectors having a total credit outstanding of not more than Rs.500 crore and overdue, if any, was for 60 days or less as of 29.02.2020.

The government introduced ECLGS 3.0 due to the continuance of the adverse impact of COVID-19 on many sectors. The ECLGS 3.0 involves extending credit up to 40% of the total credit outstanding across all lending institutions as of 29.02.2020. The tenor of the loan is six years, including a moratorium period of two years under ECLGS 3.0.

The government introduced the ECLGS for providing 100% guarantee coverage to the banks, lending institutions and Non-Banking Financial Institutions (NBFCs) for enabling them to extend emergency credit to Micro, Small and Medium Enterprises (MSMEs) and business entities suffering due to the pandemic and for helping them to meet their working capital requirements.

The introduction of ECLGS 1.0 was part of the Rs.20 lakh crore COVID-19 relief package, known as the Atmanirbhar Bharat Abhiyan. It provided Rs.3 lakh crore worth of guaranteed and collateral-free loans to the MSMEs in the country for mitigating the distress caused by the pandemic and lockdown situation. The tenor of the loan was four years, including a moratorium period of one year under ECLGS 1.0.

Under ECLGS 1.0, the borrowers could obtain additional credit up to 20% of their total credit outstanding as 29.02.2020. It provided collateral-free, fully guaranteed credit to MSMEs with total credit outstanding of Rs.25 crore as of 29.02.2020, along with an annual turnover cap of Rs.100 crore for the FY 2019-20. This scheme was valid till October 2020 but later on, extended till November 2020. 

The government introduced the ECLGS 2.0 in November 2020 by extending the Rs.3 lakh crore COVID-19 relief package to cover and support 26 stressed sectors identified by the Kamath Committee and the healthcare sector. The tenor of the loan under ECLGS 2.0 was five years, including a one-year moratorium period. The entities that had a credit outstanding of Rs.50-500 crore as of 29.02.2020 were eligible. The Finance Minister announced that both the ECLGS 1.0 and ECLGS 2.0 would be valid till 31.03.2021.

Accordingly, on 31.03.2021, considering the country’s pandemic situation, the government announced the ECLGS 3.0 to cover sectors of travel, hospitality, tourism, leisure and sporting and extend the Emergency Credit Line Guarantee scheme till 30.06.2021.

The government’s extension of ECLGS will help many distressed businesses to recover and get back strong during the country’s pandemic situation. The extension of three months will enable the distressed entities to revive their business, thus, reviving the economy.  

The modifications introduced in the ECLGS and the incentives provided to Member Lending Institutions (MLIs) enable the availability of additional funding facilities to eligible beneficiaries to revive the economy and protect jobs and create an employment generation environment.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in