Emergency credit line guarantee scheme (ECLGS)

India’s Finance Ministry introduced the emergency credit line guarantee scheme (ECLGS) in May 2020, intending to provide financial assistance to this pandemic hit economy. Through this scheme, the Indian government aims to provide Rs. 3-lakh crore of unsecured loans to micro, small, and medium enterprise (MSME) and and companies across the country. This is to mitigate the losses suffered due to COVID-19-induced lockdowns.

Keeping the economic impact of this pandemic in mind, the Indian Government has extended the deadline of this scheme from June 2021 to September 2021.

Versions of ECLGS scheme

  • ECLGS 1.0: Launched in May 2020, it offered loans up to 20% of outstanding credit as of 29 February, 2020. This is subject to a maximum of Rs. 5 crore, for MSME and other eligible businesses.
  • ECLGS 2.0: Introduced in November 2020, it extended the scheme to 26 stressed sectors identified by the Kamath Committee, as well as healthcare and education sectors. The loan limit was increased to Rs. 10 crore or 40% of outstanding credit, whichever is lower.
  • ECLGS 3.0: Announced in March 2021, it covered business enterprises in hospitality, travel and tourism, leisure and sporting sectors. The loan limit was further enhanced to Rs. 40 crores or 40% of outstanding credit, whichever is lower.
  • ECLGS 4.0: Launched in June 2021, it focused on supporting the healthcare sector by providing loans up to Rs. 2 crore for setting up on-site oxygen generation plants in hospitals and clinics. The interest rate was capped at 7.5% for this version.


Besides helping small and medium enterprises (SME) meet their working capital requirements, ECLGS 3.0 will also extend financial assistance to companies from other sectors. This includes sports, leisure, hospitality, travel and tourism, and sectors that have suffered severely during this lockdown. This scheme is available to organisations with total outstanding credit of less than Rs.500 crores as of 29 February 2020. The overdue balance is less than 60 days as of the date mentioned earlier.

ECLGS 3.0 will have a repayment tenure of 6 years with a moratorium period of 2 years. The last date of disbursement for ECLGS 3.0 has been set to 30 September 2021. Under this scheme, the credit amount will be 40% of the total outstanding on 29 February 2020.

Purpose of emergency credit line guarantee scheme (ECLGS)

The emergency credit line guarantee scheme was introduced as a part of the Indian government’s COVID-19 financial relief package. Under this scheme, financial institutions in India provide emergency loan facilities to various companies and MSME that have suffered during this pandemic. This scheme can aid firms to meet their working capital needs and other operational costs as well.

Below are some highlights of this scheme

Types of loans offered

Under this emergency credit line guarantee scheme, borrowers can get Term Loans without keeping any collateral.

Loan amount sanctioned

The loan amount sanctioned under this government scheme is up to 20% of the total outstanding of an applicant as of 29 February 2020. However, under ECLGS 3.0, this threshold has been extended to 40%.

ECLGS eligibility

Any SME or MSME, including partnership, proprietorship, or limited liability partnership (LLP), are eligible for the ECLGS scheme. Applicants with a total outstanding of Rs.50 crore on 29 February 2020 and a yearly turnover of Rs.250 crores in FY2019-20 are eligible here.

Under ECLGS 3.0, companies from the travel and tourism, hospitality, sports, and leisure sector are also eligible for this scheme. Here, the outstanding should be less than Rs.500 crores on 29 February 2020.

Interest rates and charges

The ECLGS interest rate is nominal, and unsecured loans can be availed at the ECLGS interest of 14% per annum.

Loan tenure

Working capital Term Loans sanctioned under the ECLGS 1.0 has a tenure of 4 years. Whereas under ECLGS 2.0 and 3.0, this period is 5 and 6 years, respectively. A point to note here is that, for 1 year, borrowers need to pay only interest, and for the remaining, they will pay interest and principal.

Nature of account

The due balance of a borrower’s account must be equal to or less than 60 days as of 29 February 2020. However, applicants with an NPA or SMA-2 status on their account on 29 February 2020 will not qualify for this scheme.

Security and guarantee fees under ECLGS

This government-backed financing scheme does not entail any processing charges or foreclosure and part-prepayment fees. Additionally, debtors are not required to pledge any collateral to avail funds under this emergency credit scheme.

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Frequently asked questions

Does the ECLGS scheme also cover borrowers under Pradhan Mantri Mudra Yojana (PMMY)?

Yes, the ECLGS scheme also covers borrowers under the PMMY, who have availed loans for their own business purposes. The scheme provides 100% guarantee coverage for additional credit up to 20% of their outstanding loan as on February 29, 2020.

Is there a moratorium period that the ECLGS scheme mandates?

Yes, the ECLGS scheme mandates a moratorium period on principal repayment for the loans granted under the scheme. The moratorium period varies depending on the version of the scheme. For ECLGS 1.0 and 2.0, the moratorium period is 1 year. For ECLGS 3.0, it is 2 years. For ECLGS 4.0, it is 6 months.

Will the GECL facility need any further collateral from MLIs?

No, the guaranteed emergency credit line (GECL) facility under the ECLGS scheme does not require any further collateral from member lending institutions (MLIs). The scheme provides 100% guarantee coverage to MLIs for extending emergency credit to eligible borrowers without any collateral or guarantee fee.

What would be the guarantee of coverage under the ECLGS scheme?

The guarantee coverage under the ECLGS scheme is 100% for the additional funds sanctioned by MLIs under the scheme. The scheme covers both fund-based and non-funds based facilities, such as Term Loans, working capital loans, and letters of credit. The guarantee coverage is provided by the national credit guarantee trustee company (NCGTC).

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