The Emergency Credit Line Guarantee Scheme (ECLGS) was the devoted totally assured and collateral-free of charge further credit assistance announced for Covid-hit micro, compact, and medium enterprises (MSMEs), Mudra borrowers, apart from supplying person loans for company purposes. Announced in May 2020, the Rs 3 lakh crore credit scheme was initially valid till October 2020 but was later extended to November followed by March this year, and subsequently till June or till guarantees for the corpus quantity of Rs 3 lakh crore are issued via two iterations viz., ECLGS 2. and ECLGS 3.. Here’s a breakdown of every thing an MSME would want to know about the scheme for securing credit:
Who is eligible?
National Credit Guarantee Trustee Company (NCGTC) gives a total assure on loans provided by banks and other member lending institutions in case of default by MSME and other borrowers which includes company enterprises which are constituted as proprietorships, partnerships, registered providers, trusts, and Limited Liability Partnerships (LLPs) apart from borrowers below Pradhan Mantri Mudra Yojana and person loans for corporations.
However, borrowers with total outstanding loans of up to Rs 50 crore in any sector and up to Rs.500 crore for these in the hospitality, travel and tourism, leisure, and sporting sector and classified as standard, SMA-, or SMA-1 accounts as of February 29, 2020, would be eligible for ECLGS loans. SMAs are particular mention accounts that show indicators of incipient strain major to the borrower defaulting in servicing the debt. While SMA- are accounts obtaining payments partially or wholly overdue for 1-30 days, SMA-1 and SMA-2 accounts have payments overdue for 31-60 days and 61-90 days respectively.
“No doubt ECLGS is a good move as at least Rs 1.8 lakh crore loan has already been disbursed. This means it has benefitted some MSMEs. However, the government should have allowed loans based on the working capital sanctioned and not the outstanding credit as of February 29 to benefit more MSMEs. Also, it doesn’t cater to SMA-2 accounts and hence not many MSMEs have benefitted so far,” Jacob Crasta, Chairman at environmental test chambers maker CM Envirosystems and former President, Assocham Southern Council told TheSpuzz Online.
How significantly credit can be availed?
Credit obtainable would be up to 20 per cent (up to Rs one hundred crore) of MSMEs total outstanding credit up to Rs 500 crore and 40 per cent (up to Rs 200 crore) for borrowers in the hospitality, travel & tourism, and leisure & sporting sector as on February 29, 2020. Importantly, borrowers who haven’t raised credit ahead of wouldn’t be capable to apply for ECLGS considering the fact that it is valid for these who are currently on the books of banks and other eligible lenders such as NBFCs and monetary institutions.
How to avail ECLGS credit if a borrower has loan accounts with numerous banks?
MSMEs would be capable to avail credit either via one lender (bank, NBFC, and so forth) or each and every of its existing lenders in the proportion to the credit sought as per the agreement among the borrower and the lender. However, if an MSME desires to take an quantity more than the proportional 20 per cent from any specific lender, then it would need a No Objection Certificate from other lenders whose share of loan the MSME is taking from that specific lender.
What’s the tenor and how significantly is the interest price?
Loans below ECLGS 1. have a tenor (maximum period of assure cover) of 4 years from the date of disbursement and 5 years below ECLGS 2.. There is no tenor prescribed for the non-fund-based facility but the initially tranche of non-fund-based loan need to be utilized on or ahead of September 30, 2021. On the other hand, for ECLGS 3., the loan tenor is six years from the date of the initially disbursement. The interest prices below the scheme are capped at 9.25 per cent for banks and FIs, and at 14 per cent for NBFCs.
How significantly is the moratorium period and repayment window?
The moratorium period on principal repayment would be one year for ECLGS 1. and 2. and two years for ECLGS 3.. The principal quantity is to be repaid in 36 installments below ECLGS 1., 48 installments below ECLGS 2., and below 3., just after the moratorium period is more than. Borrowers can also pre-spend at no further price.
Who are registered lenders?
As of December 21, 2020, 12 public sector banks which includes SBI, Union Bank, Bank of Maharashtra, Canara Bank, and so forth., 22 private banks which includes smaller sized ones such as Lakshmi Vilas, Karur Vysya, Federal Bank, Jammu and Kashmir Bank, and so forth., six foreign banks which includes Standard Chartered, DBS Bank India, HSBC, and so forth., six compact finance banks which includes AU Small Finance Bank, Utkarsh Small Finance Bank, and so forth., two monetary institutions – SIDBI and Export and Import Bank of India, 42 regional rural banks, and 127 NBFCs had been registered member lending institutions for the ECLGS scheme.