Emergency Credit Line Guarantee Scheme Extended by One Month to Support Businesses Amid Rising Demand

The Central Government has decided to prolong the Emergency Credit Line Guarantee Scheme (ECLGS) by an additional month, now ending on 30 November 2020. This extension will remain in effect until either the new deadline or until the allocated Rs 3 lakh crore is fully utilised, whichever comes first. This decision aims to support sectors reopening and cater to the anticipated rise in demand during the festive period.

The ECLGS was introduced by the finance ministry in May as a component of the Aatma Nirbhar Bharat Package (ANBP). It was designed to offer fully guaranteed, collateral-free credit to Micro, Small and Medium Enterprises (MSMEs), business enterprises, individual business loans, and MUDRA borrowers. The scheme allows for additional credit up to 20 percent of their outstanding credit as of 29 February 2020.

To qualify for this scheme, borrowers must have had credit outstanding up to Rs 50 crore as of 29 February 2020 and an annual turnover not exceeding Rs 250 crore. The interest rates are capped at 9.25 percent for banks and financial institutions, while non-banking financial companies (NBFCs) can charge up to 14 percent.

The loan tenure under this scheme is set at four years, which includes a one-year moratorium on principal repayment. This structure aims to provide businesses with breathing space to stabilise their operations before commencing repayments.

This extension offers another chance for eligible borrowers who have not yet taken advantage of the scheme to secure credit. The government anticipates that this move will help businesses manage cash flow challenges and support economic recovery as various sectors resume operations.

"The Union Government has extended the Emergency Credit Line Guarantee Scheme (ECLGS) by one month till November 30th, 2020, or till such time that an amount of Rs. 3 lakh crore is sanctioned under the Scheme, whichever is earlier, in view of the opening up of various sectors in the economy and the expected increase in demand during the ongoing festive season. This extension will provide a further opportunity to such borrowers who have not availed of the Scheme so far, to obtain credit under the Scheme," the statement said.

By providing additional time for businesses to access funds, the government aims to bolster economic activity during a crucial period. The scheme's continuation reflects a strategic effort to ensure that financial support reaches those in need as industries gradually recover from disruptions caused by the pandemic.