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. The Indian Government’s aim through this scheme was to provide Rs.3 lakh crore of unsecured loans to MSMEs and companies across the country 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.


Besides helping SMEs 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 29th February 2020. The overdue balance is less than 60 days as of the date mentioned earlier.

ECLGS 3.0 will have a repayment tenor of 6 years with a moratorium period of 2 years. Also, the last date of disbursement for ECLGS 3.0 has been set to 30th September 2021. Moreover, under this scheme, the credit amount will be 40% of the total outstanding on 29th 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 MSMEs 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 29th 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 29th February 2020 and a yearly turnover of Rs.250 crores in FY2019-20 are eligible here.

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

Interest rate and charges

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

Loan tenor

Working capital term loans sanctioned under the ECLGS 1.0 has a tenor 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 29th February 2020. However, applicants with an NPA or SMA-2 status on their account on 29th 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.

Validity of ECLGS

The validity of ECLGS 1.0, 2.0, and 3.0 has been extended to June 2021, or till the Rs.3 lakh crores is disbursed. However, the validity of ECLGS 3.0 has been extended till September 2021.

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