Emergency Credit Line Guarantee Scheme (ECLGS)

In News: The Centre has announced raising the allocation under the Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore to Rs 5 lakh crore.

• The additional amount has been earmarked exclusively for enterprises in hospitality and related sectors.
• The ECLGS was unveiled as part of the comprehensive package announced by the government in May 2020 to aid the MSME sector in view of the economic distress caused by the Covid pandemic and lockdowns.
• The tourism sector was one of the worst hit, as people postponed/cancelled their business and leisure travel plans.
• With high immunisation levels, progressive roll-back of restrictions and overall economic recovery, conditions are in place for sustained growth in demand for these sectors as well.
• The ECLGS credit facility is likely to help the industry fund its expansion, as demand for travel continues to surge.

Emergency Credit Line Guarantee Scheme (ECLGS)

• The scheme was launched as part of the Aatmanirbhar Bharat Abhiyan package announced in May 2020 to mitigate the distress caused by coronavirus-induced lockdown, by providing credit to different sectors, especially Micro, Small and Medium Enterprises (MSMEs).

Objective: To provide fully guaranteed and collateral free additional credit to MSMEs, business enterprises, MUDRA borrowers and individual loans for business purposes to the extent of 20% of their credit outstanding as on 29th February, 2020.

• 100% guarantee coverage is being provided by the National Credit Guarantee Trustee Company, whereas Banks and Non Banking Financial Companies (NBFCs) provide loans.
• Eligibility: Borrowers with credit outstanding up to Rs. 50 crore as on 29th February, 2020, and with an annual turnover of up to Rs. 250 crore are eligible under the Scheme.
• On 1st August, 2020 the government widened the scope of the Rs. 3 lakh crore-ECLGS scheme by doubling the upper ceiling of loans outstanding and including certain loans given to professionals like doctors, lawyers and chartered accountants for business purposes under its ambit.
• Tenor of loans provided under the Scheme is four years, including a moratorium of one year on principal repayment.
• Interest rates under the Scheme are capped at 9.25% for Banks and Financial Institutions (FIs), and 14% for NBFCs.
• Present Status: As per data by the government and banks, loans of about Rs 3.67 lakh crore have been sanctioned under ECLGS till August 5, and Rs 2.54 lakh crore had been disbursed till April 30.

Benefits of the scheme:

• The scheme is expected to provide credit to the sector at a low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses and recover early.
• The Scheme is expected to have a positive impact on the economy and support its revival.

National Credit Guarantee Trustee Company Ltd

• Subsequent to the Central Budget announcements during the year 2013-14 to set up various credit guarantee funds, a common trustee company in the name and style of National Credit Guarantee Trustee Company Ltd (NCGTC) was set up by the Department of Financial Services, Ministry of Finance, Government of India to, inter alia, to act as a common trustee company to manage and operate various credit guarantee trust funds.

Source: Indian Express

Previous Year Question

Q.1) What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme”?(2016)

1. To bring the idle gold lying with Indian households into the economy
2. To promote FDI in the gold and jewellery sector
3. To reduce India’s dependence on gold imports

Select the correct answer using the code given below.

1. 1 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3