ECLGS Scheme:- When it comes to eligible credit facilities offered to borrowers whose total credit outstanding (fund-based only) across all lending institutions and days past due as of February 29, 2020, was up to The ECLGS scheme fully guarantees member lending institutions up to Rs. 50 crore and 60 days, respectively.
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Objectives of the ECLGS scheme
To offer complete guarantee coverage for GECL assistance for loans that are still due as of March 31, 2021, or February 29, 2020, whichever date is earlier. Under ECLGS 2.0, 2.0(Extension), & 4.0, qualified borrowers will receive the guarantee coverage in the form of a non-fund based facility, extra term loan, or working capital term loan facility. All Member Lending Institutions (MLIs) would cover banks, financial institutions, and supplementary term loan facilities, or NBFCs, to eligible borrowers. These qualified borrowers comprise Micro, Small, and Medium-Sized Enterprises (MSME) and Business Enterprises, including interested PMMY borrowers, as a special Scheme in light of the COVID-19 problem.
ECLGS 1.0 (Extension) is a scheme that offers new and current ECLGS 1.0 borrowers who meet the amended reference date of March 31, 2021, additional assistance.
In addition to the healthcare sector, whose total credit outstanding (fund-based only) across all lending institutions and days past due as of February 29, 2020, was above Rs. 50 crore but not exceeding Rs. 50 crore, ECLGS-2.0 offers member lending institutions a 100 percent guarantee with respect to eligible credit facilities extended by them to their borrowers in the 26 sectors identified by the Kamath Committee on Resolution Framework in its report dated 04.09.2020.
The ECLGS 3.0 scheme offers member lending institutions a 100 percent guarantee on qualified credit facilities extended to their borrowers in the following sectors: Travel & Tourism, Leisure & Sporting, Civil Aviation (including scheduled and non-scheduled airlines, chartered flight operators, air ambulances, airports, and ground handling units), and Hospitality (including hotels, restaurants, wedding halls, canteens, etc.). The guarantee is valid for days past due up to 60 days from the date of the guarantee.
ECLGS 4.0 is a program that offers member lending institutions a 100 percent guarantee on qualified credit facilities provided to qualified medical colleges, nursing homes, hospitals, clinics, and units producing oxygen cylinders and liquid oxygen, among other units for the construction of on-site oxygen-producing plants. “Guaranteed Emergency Credit Line (GECL)” is the name of the credit product for which the Scheme will provide a guarantee.
Definitions for the Purpose of the ECLGS Scheme
“Amount in Default” refers to the total amount of debt that the borrower owes on a term loan, working capital term loan facility, or crystallized non-fund facility, including interest. Whichever is less: the remaining amount as of the claim’s filing date, the account’s NPA date, or any other date the Trustee Company designates for submitting a claim against the guarantee cover priority.
The word “credit facility” describes the financial support offered by the Scheme to qualified individuals, business enterprises, or Micro, Small, and Medium-Sized Enterprises (MSME) borrowers who have taken out working capital or supplemental term loans for commercial purposes. A distinct lone account will oversee the Scheme’s financial support.
The term “assure cover” refers to the highest stage of default coverage that every certified borrower may additionally reap for the loan facility that the lender has furnished. a hundred guarantee coverage of the quantity in default might apply to this scheme.
For the purposes of this scheme, the Pradhan Mantri Mudra Yojana (PMmy) Credit Score Programme may also fall under the category of “enterprise establishments/MSMEs”.
“Non-appearing assets” are assets that the Reserve Financial Institution of India has designated as special as they don’t seem in line with periodically released guidelines and advice.
For a lending institution, the phrase “interest rate” refers to the interest rate that the institution may declare from time to time in compliance with Reserve Bank of India guidelines. “Tenure of guarantee cover” describes the longest period of guarantee cover that needs to align with the GECL loan’s term.
For this purpose, MLIs will comprise (i) all Scheduled Commercial Banks (SCBs) and (ii) Scheduled Urban Co-operative Banks (SUCBs), provided they meet the qualifying requirements listed below.
As long as guarantees totaling Rs 4,50,000 crore—taking into account every aspect of the ECLGS Scheme—are issued, which might happen at any time between the date of the NCGTC’s orders and March 31, 2022, the Programme will be applicable to all loans approved under the GECL.
What is the Interest Rate for the ECLGS Scheme?
The following restrictions apply to the interest rate on GECL under ECLGS 1.0, 1.0 (Extension), 2.0, 2.0 (Extension), 3.0, and 3.0 (Extension):
An additional 1% will be added to either the external benchmark lending rate for MSMEs set by the RBI or the marginal cost of lending rate for non-MSMEs, resulting in a maximum annual rate of 9.25 percent for banks and other financial institutions.
For NBFCs, the annual interest rate on GECL cannot be higher than 14%.
The extra capacity is limited to MLIs’ existing customers, therefore they are not allowed to charge borrowers additional processing fees.
There will be no penalty interest charged on future loans if any previously agreed-upon covenants on existing credit are broken during the sanction period.
The interest rate on GECL under ECLGS 4.0 will be 7.5 percent annually for loans up to Rs. 2 crore to medical facilities, nursing homes, clinics, hospitals, and units producing oxygen cylinders and liquid oxygen, as well as other facilities for establishing on-site oxygen production plants.
Nature of Account and Tenor of Credit
In order to be eligible for coverage under the Scheme, the borrower must open a new loan account and keep any current loan account(s) separate.
Loans made under the GECL have a four-year duration starting on the day of the first disbursement under ECLGS 1.0.
Loans made under the GECL will mature after five years from the date of the first payout under the ECLGS 1.0 (Extension).
According to ECLGS 2.0, the duration of GECL facilities should be for a period of five years from the date of the first fund-based facility distribution or the first date of utilization of a non-fund-based facility, whichever comes first. To qualify for guarantee coverage, the permitted non-fund-based facility must be used for the first time by June 30, 2024, at the latest.
According to ECLGS 2.0(Extension), the duration of GECL facilities is six years from the date of the first fund-based facility distribution or the first date of use of a non-fund-based facility, whichever comes first.
Facilities granted under GECL are subject to usage for six years from the first payment under ECLGS 3.0 & 3.0 (Extension).
According to ECLGS 4.0, the duration of GECL facilities shall not exceed five years from the date of the first payment for a fund-based facility or the first date of use for a non-fund-based facility, whichever occurs first.
June 30, 2024, is the deadline for distributing funds under the fund-based facility and using LC under the non-fund facility. The scheme’s final distribution date for the fund-based facility is June 30, 2024.
Ans- The Indian government wants to give micro, small, and medium-sized enterprises (MSMEs) and businesses all throughout the nation unsecured loans of Rs. 3 lakh crore through this program. This is to lessen the losses brought on by lockdowns brought on by COVID-19.
Q. What is the GECL scheme’s complete form?
Ans- Guaranteed Emergency Credit Line Programme (GECL)