The Emergency Credit Line Guarantee Scheme was formulated to mitigate the stress caused by the COVID-19 pandemic on several sectors across the country
Finance Minister Nirmala Sitharaman on Tuesday announced that the Centre would further extend the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023, with an expanded guarantee cover of Rs 5 lakh crore.
News agency PTI quoted her as saying, “ECLGS scheme to be extended till March 2023 and guarantee cover expanded by Rs 50,000 to Rs 5 lakh crore.”
As this comes as a relief, let’s try to understand what the Emergency Credit Line Guarantee Scheme is.
Emergency Credit Line Guarantee Scheme explained
The Emergency Credit Line Guarantee Scheme was formulated to mitigate the stress caused by the COVID-19 pandemic on several sectors across the country.
It was first announced on 13 May, 2020 by Finance Minister Nirmala Sitharaman.
The aim of the scheme was to provide relief to micro, small and mid sized firms hit the hardest by the pandemic. This scheme was part of the Rs 20 lakh crore called the Atmanirbhar Bharat Abhiyaan for COVID relief.
Who is eligible under the ECLG Scheme?
According to the government, the following can avail of the scheme:
- Enterprises with a turnover of up to Rs 250 crore (FY 2019-20) with outstanding loans up to Rs 50 crore, as of 29 February, 2020
- GECL credit provided will be up to 20 per cent of the borrower’s total outstanding credit as of 29 February, 2020.
How does the ECLG scheme work?
The ECLGS initially had a repayment period of four years. However, the limits were revised.
After the changes, outstanding credit was increased from Rs 25 crore to Rs 50 crore. Also, the annual turnover amount was raised to Rs 250 crore from Rs 100 crore. A condition for availing this loan was that the account should not be 60 days past its due as of 29 February, 2020.
Many versions of ECLGS
Since its announcement, the scheme has been extended. In November 2020, Finance Minister Nirmala Sitharaman announced the launch of ECLGS 2.0 by extending the Rs 3 lakh crore scheme to support 26 stressed sectors identified by the Kamath Committee and the healthcare sector. The scheme was valid till 31 March, 2021.
It was further widened to support the hospitality, travel and tourism, leisure and sporting sectors and its validity was extended to 30 June 2021.
Interestingly, since inception, the scheme has provided relief to over 10.5 million crore MSME businesses.
With inputs from agencies