Emergency Credit Line Guarantee Scheme (ECLGS)
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Context
- The finance ministry has expanded the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) to enhance the maximum loan under the scheme. The loan limit under the scheme has been raised to ₹1,500 crore from ₹400 crore to help the Covid-hit sector tide over the liquidity stress. Recently, The Department of Financial Services (DFS) has also modified the ECLGS to enhance the maximum loan amount eligibility for airlines.
Emergency Credit Line Guarantee Scheme (ECLGS)
- India’s Finance Ministry introduced the Emergency Credit Line Guarantee Scheme (ECLGS) in May 2020, intending to provide financial assistance to this pandemic hit economy. The Indian Government’s aim through this scheme was to provide Rs.3 lakh crore of unsecured loans to MSMEs and companies across the country to mitigate the losses suffered due to COVID-19 induced lockdowns.
Purpose of Emergency Credit Line Guarantee Scheme (ECLGS)
- The Emergency Credit Line Guarantee Scheme was introduced as a part of the Indian Government’s COVID-19 financial relief package. Under this scheme, financial institutions in India provide emergency loan facilities to various companies and MSMEs that have suffered during this pandemic. This scheme can aid firms to meet their working capital needs and other operational costs as well.
ECLGS 3.0
- Besides helping SMEs meet their working capital requirements, ECLGS 3.0 will also extend financial assistance to companies from other sectors. This includes sports, leisure, hospitality, travel and tourism, and sectors that have suffered severely during this lockdown.
- According to modified ECLGS 3.0, an airline would be eligible for "100 per cent of their fund based or non-fund-based loan outstanding as on the reference dates or ₹1,500 crore, whichever is lower; and of the above, ₹500 crore shall be considered, based on equity contribution by the owners." The modifications introduced are aimed to give necessary collateral-free liquidity at reasonable interest rates to tide over their present cash flow problems.
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