Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector

Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector

Part of: GS Prelims and Mains III – Indian economy and issues related to it

In news:

• Banks have sanctioned more than Rs. 1 lakh-crore loans under the Rs. 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector reeling under COVID-19-induced economic slowdown.
• The scheme is the biggest fiscal component of the Rs. 20-lakh crore ‘Aatmanirbhar Bharat Abhiyan’ package announced by Finance Minister last month.

Important value additions

Emergency Credit Line Guarantee Scheme (ECLGS) 

• The ECLGS scheme has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown which has severely impacted manufacturing and other activities in the MSME sector.
• The Scheme aims at mitigating the economic distress being faced by MSMEs by providing them additional funding of up to Rs. 3 lakh crore in the form of a fully guaranteed emergency credit line.
• The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and Non-Banking Financial Companies (NBFCs) to increase access to, and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.