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.
