Topics Covered: Schemes for the vulnerable sections of the society.
Emergency Credit Line Guarantee Scheme (ECLGS)
What to study?
For Prelims and Mains: Key features and significance of the scheme.
Context: The Union Cabinet has given its approval for the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs and MUDRA borrowers.
- Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
- The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
- The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.
- Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
- No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
- Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.
Benefits of the scheme:
- The scheme aims to mitigate the distress caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
- The scheme is expected to provide credit to the sector at a low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.
- By supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.
- Classification of MSMEs- old vs new.
- Contributions of MSMEs to GDP.
- What are NBFCs?
- What is GECL facility?
- What is NCGTC?