Nirmala Sitharaman Extends the Rs 3-lakh Crore Collateral-free ECLG Scheme to Provide Support for the Benefit of MSMEs

On Thursday the Emergency Credit Liquidity Guarantee Scheme (ECLG) has been extended till March 31, 2021 by the Government; it will be beneficial for millions of MSMEs in the country.

At the beginning, the scheme was supposed to end on October 30, 2020; but afterward it was extended by a month and was supposed to lapse on November 30.

Finance Minister Nirmala Sitharaman expressed during a press conference that a total amount of Rs 2.05 lakh crore has been sanctioned to 61 lakh borrowers, out of which Rs 1.52 lakh crore has been disbursed.

To be eligible for loans under the scheme, the borrowers must have an outstanding credit up to Rs 50 crore as on February 29 and with an annual turnover of Rs 250 crore are. The scheme was later expanded  and accordingly the eligible borrowers for the scheme include MSME units, business enterprises, individual loans for business purposes and MUDRA borrowers.

Announced as part of the Atma Nirbhar Baharat package in May to support MSMEs, the scheme provided fully guaranteed and collateral-free loans for amounts up to 20% of outstanding loans as of February 29.
 

To ensure more companies can benefit from the scheme, on February 29 it was decided to increase the upper ceiling of loans outstanding as from Rs 25 crore to Rs 50 crore for being eligible under the scheme.

 
Also, Sitharaman announced that a guarantee credit is launching to support stressed sectors. To be utilized for 100% guarantee collateral-free additional credit at capped interest rates to:
 

• Entities in 26 stressed sectors identified by Kamath Committee plus health care sector with credit outstanding of above Rs 50 crore and up to Rs 500 crore as on 29.02.2020.
• Entities with outstanding up to Rs 50 crore previously covered under the existing scheme.
• No upper ceiling on annual turnover.
• Entities to be up to 30 days past due (SMA 0) as on 29.02.2020.
• Additional credit up to 20% of outstanding as on 29.02.2020.

The additional credit under ECLGS 2.0 will be valid for 5 years, which includes a one-year moratorium on principal repayment; and the scheme will be available till 31.03.2021.

ECLGS 2.0 will provide much needed convenience to stressed sectors by helping entities sustain employment and meet liabilities. It is also expected to benefit the MSME sector which provides goods and services to eligible entities.

Stressed sectors include power, construction, iron and steel, roads, real estate, wholesale trading, textiles, consumer durables, aviation, logistics, hotels, restaurants and tourism, mining.