Emergency Credit Line Guarantee Scheme : ?3 lakh crore loan

The Union Cabinet had recently approved additional funding up to ?3 lakh crore that was announced by Finance Minister Nirmala Sitharaman as part of the ?20 lakh crore economic package.

Name of the Scheme: The Scheme shall be named as ‘Emergency Credit Line Guarantee Scheme (ECLGS) and the credit product for which guarantee would be provided under the Scheme shall be named as ‘Guaranteed Emergency Credit Line (GECL)’ 

Eligible MLIs i.e. Lenders:

• MLIs for this purpose shall include all Scheduled Commercial Banks (SCBs), Non- Banking Financial Companies (NBFCs) and Financial Institutions (FIs), as specified.
• All NBFCs which have been in operation for 2 years as on 29th February, 2020 would be eligible under the Scheme.

Validity of the scheme:

The Scheme would be applicable To

• all loans sanctioned under GECL up to 31.10.2020, or
• till an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is earlier. 

Eligible Borrowers with Conditions :

All Business Enterprises ( Traders Also Eligible) /MSME (Manufacturer and Services Providers) borrower accounts;

A.  with combined outstanding loans across all MLIs of up to Rs. 25 crore as on 29.2.2020, AND

B. annual turnover of up to Rs. 100 crore for FY 2019-20 are eligible for the Scheme. AND

C.  Borrower accounts should be less than or equal to 60 days past due as on 29th February, 2020 in order to be eligible under the Scheme. i.e. All borrowers which have not been classified as SMA 2 or NPA by any of the MLIs as on 29th February, 2020 will be eligible for the Scheme. AND

D. Business Enterprises / MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to Business Enterprises / MSMEs that are not required to obtain GST registration.

Loan amount eligibility under the Guarantee Coverage:

The amount of GECL funding to eligible Business Enterprises / MSME borrowers either in the form of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs)

• would be up to 20% of their total outstanding loans up to Rs. 25 crore as on 29th February, 2020, subject to the borrower meeting all the eligibility criteria mentioned above.
• In case the borrower wishes to take from any lender an amount more than the proportional 20% of the outstanding credit that the borrower has with that Particular lender, a No Objection Certificate (NOC) would be required from all other lenders.
• No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20% of the outstanding credit that the borrower has with that lender

Interest Rate of Credit under the Scheme:

• For Banks and FIs, lending rate linked to one of the external benchmark rates prescribed by RBI +1% subject to a maximum of 9.25% per annum.
• For NBFCs, the interest rate shall not exceed 14% per annum

Processing Charges and penal Interest and other fees:

• No additional processing fee shall be charged by MLIs to borrowers
• No penal interest due to any non-compliance of the already accepted covenants on the existing credit facilities may be charged on additional loans during the sanction time.
• No prepayment penalty shall, however, be charged by the MLIs in case of early repayment.
• No Guarantee Fee shall be charged from the MLIs by NCGTC for the Credit facilities provided under the Scheme.

Nature of account and Tenor of Credit under the Scheme:

• The tenor of loans provided under GECL shall be for a tenor of four years (4 Years) from the date of disbursement.
• Moratorium period of 1 year on the principal amount shall be provided to borrowers during which interest shall be payable
• The principal shall be repaid in 36 installments after the moratorium period is over.

Collateral Security:

• No additional collateral shall be asked for additional funding under GECL.