Government Announces ECLGS 4.0 and Expands the Scope and Tenor of ECLGS

The government expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) on Sunday. The government announced the ECLGS 4.0 and expanded its scope on account of the economic disruptions caused by the COVID-19 second wave in India.

Under the ECLGS 4.0, a 100% guarantee cover is given to loans up to Rs.2 crore to the hospitals, clinics, nursing homes and medical colleges for setting up on-site oxygen generation plants. The cap on the interest rate under the ECLGS 4.0 is 7.5%. 

The borrowers who had availed loans under the ECLGS 1.0 having overall tenure of four years consisting of repayment of the only interest during the first 12 months and repayment of principal and interest in 36 months can now avail a tenure of five years on their ECLGS loans.

However, the borrowers under the ECLGS 1.0 who are eligible for restructuring under the RBI guidelines of 5 May 2021 can avail of the extended tenure of five years on their ECLGS loans. The extended five years tenure on the ECLGS loans consists of repayment of interest only during the first 24 months and repayment of principal and interest in 36 months.

The government provided additional ECLGS assistance of up to 10% of the outstanding amount on 29 February 2020 to the ECLGS 1.0 borrowers. The government will provide additional ECLGS assistance up to 10% of the outstanding to borrowers covered under the ECLGS 1.0 as per the restructuring under the RBI guidelines.  

The government removed the current ceiling of Rs.500 crore loan outstanding for eligibility under the ECLGS 3.0. However, removing the current ceiling of Rs.500 crore outstanding for eligibility is subject to maximum additional ECLGS assistance limited to each borrower to 40% or 200 crore, whichever is lower. 

The government extended the scope of ECLGS 3.0 by extending it to the Civil Aviation Sector. The ECLGS 3.0 covered business enterprises in travel and tourism, hospitality, sporting and leisure sectors with total credit outstanding not exceeding Rs.500 crore as of 29 February 2020 and overdue, if any, for 60 days or less on that date. The tenor of loans under ECLGS 3.0 is six years, including a moratorium period of two years.

The government extended the ECLGS validity to 30 September 2021 or until the guarantees for Rs.3 lakh crore are issued. The disbursement of the loans under the ECLGS is permitted up to 31 December 2021.

The National Credit Guarantee Trustee Company (NCGTC) will issue the detailed operational guidelines of the extension in scope and changes in the ECLGS. The changes in the ECLGS will enhance the impact and utility of the ECLGS by giving additional assistance to the MSMEs. The modifications in ECLGS will safeguard livelihoods and help in the seamless restoration of the business activities. They will facilitate the flow of institutional credit at reasonable terms. 

The changes made in the ECLGS will provide immense support and relief to businesses and MSMEs, particularly when they have been badly affected by the COVID-19 pandemic. The ECLGS 4.0 will help overcome the COVID-19 pandemic by providing financial assistance to the hospitals, nursing homes and clinics. The changes in ECLGS will help in reviving the economy of India.

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

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