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What is the ECLGS scheme?

The ECLGS scheme provides member lending institutions with a 100 percent guarantee in respect of eligible credit facilities extended to their borrowers whose total credit outstanding (fund based only) across all lending institutions and days past due as of February 29, 2020 were up to Rs.50 crore and 60 days, respectively.

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Versions of the ECLGS scheme 

ECLGS 1.0 (Extension) is a plan that provides further help to existing ECLGS 1.0 borrowers and new ECLGS 1.0 borrowers that meet the updated reference date of March 31, 2021.

ECLGS-2.0 is a scheme that provides a 100 percent guarantee to member lending institutions in respect of 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, as well as 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 3.0 is a scheme that provides member lending institutions with a 100 percent guarantee on eligible credit facilities extended to their borrowers in the Hospitality (hotels, restaurants, marriage halls, canteens, etc. ), Travel & Tourism, Leisure & Sporting, and Civil Aviation (scheduled and non-scheduled airlines, chartered flight operators, air ambulances, airports, and ground handling units) sectors whose days past due are up to 60 days as of the date of the guarantee.

ECLGS 4.0 is a scheme that provides member lending institutions with a 100 percent guarantee on eligible credit facilities extended to eligible hospitals, nursing homes, clinics, medical colleges, units engaged in the manufacture of liquid oxygen, oxygen cylinders, and other units for the establishment of on-site oxygen producing plants. The loan instrument for which the Scheme will give a guarantee will be known as the ‘Guaranteed Emergency Credit Line (GECL).’

Objectives of the ECLGS scheme 

To provide 100 percent guarantee coverage for GECL assistance of loans outstanding as of February 29, 2020 or March 31, 2021, whichever is higher. The guarantee coverage will be given to eligible borrowers in the form of additional term loan/working capital term loan facility and/or non-fund based facility (under ECLGS 2.0, 2.0(Extension) & 4.0). The coverage will be available for banks and financial institutions, and additional term loan facility, NBFCs, from all Member Lending Institutions (MLIs) to eligible borrowers. Such eligible borrowers include Business Enterprises / Micro, Small and Medium Enterprise (MSME) borrowers, including interested PMMY borrowers, in view of COVID-19 crisis, as a special Scheme

Eligible Borrowers Under the ECLGS scheme 

The following establishments or entities are eligible for borrowing under the ECLGS scheme under the different versions of the scheme:

VersionEligible Borrower
ECLGS scheme 1.0As of 29.2.2020, all Business Enterprises/MSMEs/individuals having a total credit outstanding (fund based only) of up to Rs. 50 crore had taken out a loan for business purposes. Existing customers on the MLI’s books are eligible for the Scheme. To be eligible for the Scheme, borrower accounts must be less than or equal to 60 days past due as of February 29, 2020.
ECLGS Scheme 1.0 (Extension)Borrowers who have availed assistance under ECLGS 1.0 or new businesses which are eligible under ECLGS 1.0 based on the revised reference date of 31st March 2021.
ECLGS Scheme 2.0 All MSMEs and Business Enterprises in the 26 sectors identified by the Kamath Committee on Resolution Framework, as well as the Healthcare sector, that have taken out a loan for business purposes and have a total credit outstanding (fund based only) of more than Rs.50 crore but less than Rs.500 crore as of February 29, 2020. The borrower accounts must be less than or equal to 60 days past due as of February 29, 2020 to be eligible for ECLGS 2.0.
ECLGS Scheme 2.0 (Extension)Borrowers who have availed assistance under ECLGS 2.0 or new businesses which are eligible under ECLGS 2.0 based on the revised reference date of 31st March 2021.
ECLGS Scheme 3.0 All MSMEs in Hospitality (hotels, restaurants, wedding halls, canteens, etc. ), Travel & Tourism, Leisure & Sporting, and Civil Aviation (including scheduled and non-scheduled airlines, chartered flight operators, air ambulances, airports, and ground handling units) sectors whose days past due are up to 60 days as of February 29, 2020
ECLGS Scheme 3.0 (Extension)Borrowers who have availed assistance under ECLGS 3.0 or new businesses which are eligible under ECLGS 3.0 based on the revised reference date of 31st March 2021
ECLGS Scheme 4.0 Existing Hospitals/nursing homes/clinics/medical colleges / units engaged in the manufacture of liquid oxygen, oxygen cylinders, etc. with a credit facility with a lending institution with days past due of up to 90 days as of March 31, 2021 and requiring assistance of up to Rs.2 crore for setting up technologies such as Pressure Swing Adsorption for on-site oxygen producing plants

Definitions for the Purpose of the ECLGS Scheme

  • “Amount in Default” means the principal and interest amount outstanding in the borrower’s account in respect of term loan/working capital term loan facility/crystallised non fund facility (including interest). The amount outstanding as of the date the account became NPA, or on the date of claim application, whichever is lower, or on such other date as Trustee Company may specify for preferring any claim against the guarantee cover subject to a claim.
  • “Credit facility” refers to financial assistance offered under the Scheme to qualifying Business Enterprises / Micro, Small and Medium Enterprise (MSME) borrowers or individuals who have taken out a loan for business purposes in the form of an additional term loan or a working capital term loan. The Scheme’s financial support will be administered through a separate loan account.
  • Guarantee Cover’ means the maximum cover available per eligible borrower of the amount in default in respect of the credit facility extended by the lending institution. For this Scheme, the guarantee coverage would be 100% of the amount in default.
  • For the purpose of this scheme, the term ‘Business Enterprises/MSMEs’ would also include loans covered under Pradhan Mantri Mudra Yojana (PMMY). 
  • “Non-Performing Assets” refers to assets that have been categorised as non-performing by the Reserve Bank of India based on instructions and guidelines given from time to time.
  • In the context of a credit facility, “primary security” refers to the assets developed as a result of the credit facility being issued.
  • “Interest Rate” for a lending institution refers to the rate declared by that lending institution from time to time in accordance with Reserve Bank of India norms, which will be used to determine the interest rate applicable to the loan.
  • “Tenure of guarantee cover” refers to the maximum time of guarantee cover that must coincide with the term of the GECL loan.
  • MLIs for this purpose shall include (i) all Scheduled Commercial Banks (SCBs), and (ii) Scheduled Urban Co-operative Banks (SUCBs), complying with the following eligibility Criteria / parameters

What is the Duration of the ECLGS Scheme?

The Scheme would be applicable to all loans sanctioned under GECL during the period from the date of issue of these guidelines by NCGTC to 31.03.2022 or till guarantees for an amount of Rs 4,50,000 crore are issued (taking into account all components of ECLGS Scheme), whichever is earlier.

What is the Interest Rate for the ECLGS Scheme?

The interest Rate on GECL under ECLGS 1.0, 1.0 (Extension), 2.0, 2.0 (Extension), 3.0, and 3.0 (Extension) is limited as per the following conditions:

  • For banks and financial institutions, the lending rate will be tied to one of the RBI’s external benchmark lending rates (for MSMEs) or the marginal cost of lending rate (for non-MSMEs) plus 1%, up to a maximum of 9.25 percent per annum.
  • The interest rate on GECL for NBFCs must not exceed 14% per year.
  • MLIs are not allowed to charge borrowers any additional processing fees because the additional capacity is only available to existing customers.
  • During the sanction period, no penalty interest may be assessed on further loans due to any non-compliance with the already agreed covenants on current credit facilities.
  • The interest rate on GECL under ECLGS 4.0 for loans up to Rs.2 crore to hospitals, nursing homes, clinics, medical institutions, units engaged in manufacturing liquid oxygen, oxygen cylinders, and other facilities for setting up on-site oxygen producing plants will be regulated at 7.5 percent per annum.

Nature of account and Tenor of Credit

  • For coverage under the Scheme, a separate loan account should be formed for the borrower, apart from any existing loan account(s).
  • The term of loans issued under the GECL shall be four years from the date of first payout under ECLGS 1.0.
  • The duration of loans issued under GECL shall be five years from the date of first payout under ECLGS 1.0(Extension).
  • The tenor of GECL facilities should be for a term of 5 years from the date of first disbursement of a fund-based facility or the first date of utilization of a non-fund-based facility, whichever is earlier, under ECLGS 2.0. The sanctioned non-fund based facility must be used for the first time on or before June 30, 2022, to be eligible for guarantee coverage.
  • The tenor of GECL facilities shall be for a term of 6 years from the date of first disbursement of a fund-based facility or the first date of utilization of a non-fund-based facility, whichever is sooner, under ECLGS 2.0(Extension). The sanctioned non-fund based facility must be used for the first time on or before June 30, 2022, to be eligible for guarantee coverage.
  • The tenor of facilities given under GECL must be six years from the date of first disbursement under ECLGS 3.0 & 3.0 (Extension).
  • The tenor of GECL facilities should be for a maximum of 5 years from the date of first payment of a fund-based facility or the first date of utilization of a non-fund-based facility, whichever is sooner, under ECLGS 4.0.
  • The closing date for distribution under the fund-based facility and the use of LC under the non-fund facility is June 30, 2022. The fund-based facility’s last date of distribution under the scheme is June 30, 2022.
  • While no deadline has been set for the non-fund based facility under ECLGS 2.0, & 2.0(Extension), MLIs should ensure that their liability under the non-fund based facility is gradually reduced, as the guarantee cover under the scheme for a particular borrower will expire after 5 years from the borrower’s first date of utilization under ECLGS 2.0 & 2.0 (Extension) or June 30, 2027, whichever comes first.
  • The MLIs, on the other hand, will not charge a prepayment penalty if the loan is repaid early.
  • Borrowers will be given a one-year moratorium on the principle amount for fund-based GECL credit under ECLGS 1.0 & 2.0, and six months for fund-based GECL credit under ECLGS 4.0, during which interest will be payable.
  • Borrowers for GECL facilities (only fund based is allowed) under ECLGS 3.0 will be given a 2-year moratorium period on the principle amount, during which time interest will be payable.
  • Borrowers for the fund-based portion of GECL credit under ECLGS 1.0 (Extension), 2.0 (Extension), 3.0 & 3.0 will be given a two-year moratorium on principal payments (Extension).
  • After the moratorium period has expired, the principal will be repaid in 36 monthly installments under ECLGS 1.0, 1.0(Extension), 48 monthly installments under ECLGS 2.0, 2.0(Extension), 3.0, & 3.0(Extension), and maximum 54 monthly installments under ECLGS 4.0.
  • Prepayment of facilities will be permitted at no extra cost to the borrower.
  • As much as possible, the account can be used in conjunction with any applicable Interest Subvention Scheme(s). The RBI has given its permission to keeping the risk weight for GECL loans at zero.

Responsibilities of the Member Lending Institution

  • Member Lending Institutions must provide Trustee Company with specific data points on a fortnightly basis in order for Trustee Company to track the Scheme’s outreach and impact. The indicative data points required shall be as follows:
  • As of February 29, 2020, the number of eligible borrowers and the amount owed (to be shown individually for Business Enterprises, MSME, and PMMY borrowers)
  • Number of GECL facilities sanctioned to Business Enterprises, MSMEs, PMMYs, and individual borrowers under the Scheme (will be shown individually for MSME, PMMY, and individual borrowers).
  • Number of GECL facilities disbursed to Business Enterprises, MSMEs, PMMYs, and individual borrowers under the Scheme (will be shown individually for MSME, PMMY, and individual borrowers).
  • Total amount of funds sanctioned under the Scheme, broken down into TL (for NBFCs) and WCTL/non-fund based facility (for banks and FIs), to be displayed separately for Business Enterprises, MSMEs, PMMY, and individual borrowers.
  • Total amount of funds issued under the Scheme, broken down by TL (in the case of NBFCs) and WCTL (in the case of banks and FIs), to be shown separately for Business Enterprises, MSMEs, PMMY, and individual borrowers.
  • Total Outstanding Amount for Term Loans (for NBFCs) and WCTL or non-fund based facility (for banks and FIs), must be displayed separately for Business Enterprises, MSMEs, PMMY, and individual borrowers.
  • Number of borrowers’ employees, broken down into Business Enterprises, MSMEs, PMMY, and individual borrowers (must be submitted at the time of sanction and updated monthly).
  • NPA ratio and default ratio (NCGTC may seek additional information from MLIs within extant regulation).
  • By displaying the Scheme details on their website and referring to the Scheme webpage, they should be able to communicate the Scheme to borrowers.
  • Lending institutions should seek to raise knowledge of the Scheme by allowing communication of the Scheme to all eligible borrowers via SMS and email campaigns.
  • The lending institution must keep a careful eye on the borrower’s account and make every effort to guarantee that it is serviced on a regular basis.
  • The lending institution is responsible for keeping the credit facility’s key securities in good and enforceable shape.
  • The lending institution shall ensure that the guarantee claim in respect of the credit facility and borrower is lodged with the Trustee Company in the form, manner, and time specified by the Trustee Company in this regard, and that no delays in notifying the default in the borrower’s account occur, resulting in the Trustee Company facing higher guarantee claims.
  • The lending institution must also ensure that it does not create any charge on the security held in the account covered by the guarantee for the benefit of any account not covered by the guarantee, either with itself or in favour of any other creditor(s) without informing the Trustee Company, either through a stipulation in an agreement with the borrower or otherwise. Furthermore, the lending institution shall secure for the Trustee Company its appointed agency the right to display defaulted borrowers’ names and particulars on the Trustee Company’s Website, either by a stipulation in an agreement with the borrower or otherwise.

Frequently Asked Questions

Who are the MLIs under the ECLGS Scheme?

All SCBs are eligible as MLIs. NBFCs which have been in operation for at least 2 years as on 29.2.2020, and FIs will also be eligible as MLIs under the ECLGS Scheme. 

What would be the guarantee coverage under the ECLGS Scheme? 

The entire funding provided under GECL shall be provided with a 100% credit guarantee coverage by NCGTC under the Scheme.

Will the ECLGS Scheme also cover borrowers under PMMY? 

Yes, loans under PMMY extended on or before 29.2.2020, and reported on the MUDRA portal shall be covered under the Scheme.

Will GECL be extended as a separate loan account or as part of the borrower’s current loan account?

For the purpose of issuing extra credit under the GECL, a separate loan account for the borrower must be established. This account will be separate from the borrower’s existing loan account(s).

What is the term of the loans issued under the GECL?

The term of GECL loans will be four years from the time they are disbursed. The MLIs, on the other hand, will not charge a prepayment penalty if the loan is repaid early.

Will the ECLGS Scheme’s loans be automatically granted without the borrower’s application or solicitation?

This is a loan that has been pre-approved. The MLI will make an offer to eligible borrowers for a preapproved loan, which they can accept or reject. If the MSME accepts the offer, it will have to submit the necessary paperwork. As a result, qualified borrowers will be given a ‘opt-out’ option under the Scheme, i.e., if the borrower is not interested in taking out the loan, he or she may declare as such.

Is there a moratorium period that the ECLGS Scheme mandates?

Yes, GECL funding will be subject to a one-year embargo on the main amount. During the moratorium period, however, interest must be paid. After the moratorium period expires, the principal will be payable in 36 installments.

Is there a turnaround time for MLIs under the ECLGS Scheme for GECL sanction?

The Department of Financial Services has set an indicative turnaround time for loans under the Scheme that will be the same as those set by the Department of Financial Services for credit support in the COVID-19 epidemic.

Will NCGTC demand a guarantee fee as part of the ECLGS Scheme?

No guarantee fee would be charged by NCGTC under the Scheme.

Will MLIs impose a processing fee while approving loans under the GECL?

Because the GECL allows lenders to give greater credit to existing customers, there will be no additional processing fees.

Will the GECL facility need any further collateral from MLIs?

MLIs are not allowed to seek for additional collateral while extending credit under the GECL.

If GECL is supplied to such borrowers, will the categorisation of existing loans issued through current government schemes such as PMEGP or PMMY change?

No. Existing loans made under current government initiatives will continue to be classified under that scheme in the same way they were before. The GECL under this Scheme will be in addition to any current loans.

What risk weight will the credit issued under GECL be given?

The RBI’s approval is needed to assign zero risk weight to the loan issued under the GECL.

What kind of security will be provided for credit given under the GECL Scheme?

In terms of cash flows (including repayments) and securities, the credit under GECL shall rank pari passu with current credit facilities, with a charge on the assets financed under the Scheme to be created within three months of disbursal.

Will MLIs be needed to sign a contract with NCGTC in order to participate in the ECLGS Scheme?

Yes, for the purposes of this Scheme, MLIs will be required to submit an Undertaking to NCGTC.

Are all NBFCs eligible to join NCGTC as MLIs?

No. The NBFC must be registered with the RBI, meet the RBI’s CRAR standards, and have been in the lending industry for at least two years as of February 29, 2020. The Scheme’s Managing Committee may, from time to time, impose additional qualification criteria.

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