New Delhi: The Guaranteed Emergency Credit Line (GECL) scheme is a crucial part of the Emergency Credit Line Guarantee Scheme (ECLGS), which offers financial support to businesses and individuals during difficult times. It’s important to understand the eligibility requirements if you are considering applying for a GECL loan for your financial assistance. In this regard, let’s take a closer look at the different components of the scheme and the eligibility criteria.
The Initiative
The Government introduced the ECLGS 1.0 and 2.0 schemes in direct response to the unprecedented challenges posed by COVID-19. These initiatives aim to support the MSME sector by encouraging financial institutions to extend additional credit, up to Rs. 3 lakh crore, at a low cost. This enables MSMEs to address their operational obligations and resume the smooth functioning of their businesses.
ECLGS 1.0
ECLGS-1.0 offers an extra 20% of the eligible credit facility, initially provided to eligible borrowers, based on the total outstanding credit (fund-based only) across all lending institutions, up to Rs. 50 Crore (up to 60 days past due) as of February 29, 2020. The repayment period spans four years from the date of the first disbursement, with a one-year moratorium on the principal amount.
ECLGS 1.0 (Extension)
The eligibility criteria for receiving assistance under ECLGS 2.0 include borrowers who have previously received assistance under ECLGS 1.0 and new businesses that meet the revised reference date of 31 March 2021.
ECLGS 2.0
Eligibility criteria for this scheme:
- Business Enterprises and MSMEs in the 26 Covid-related stressed sectors identified by the Kamath Committee on Resolution Framework and the Healthcare sector.
- Credit outstanding should be between Rs. 50 Crore and Rs. 500 Crore as of 29.02.2020.
- Days Past Due should be less than or equal to 60 days past due (regular, SMA-0 & SMA-I) as of February 29, 2020.
Under ECLGS 2.0 (Extension), eligibility extends to entities that have previously availed assistance under ECLGS 2.0 or new businesses meeting the criteria of ECLGS 2.0, taking into account the revised reference date of 31st March 2021.
ECLGS 3.0
In the dynamic landscape of ECLGS 3.0, eligibility embraces a spectrum of entities, ranging from Business Enterprises to MSMEs in the vibrant Hospitality and related sectors, along with the pivotal Civil Aviation Sector. Ensuring inclusivity, the criteria for Days Past Due stand at a reasonable up to 60 days as of 29th February 2020.
Moving forward with ECLGS 3.0 (Extension), the horizon widens to welcome borrowers who have previously sought assistance under ECLGS 3.0. Additionally, the gateway extends to new businesses meeting the criteria of ECLGS 3.0, with a nuanced consideration of the revised reference date, either on 31st March 2021 or 31st January 2022. This extension mirrors the scheme’s adaptability and commitment to supporting a diverse spectrum of enterprises.
ECLGS 4.0
In the comprehensive framework of ECLGS 4.0, inclusivity is extended to entities of paramount importance, including existing hospitals, nursing homes, clinics, medical colleges, and units engaged in the crucial manufacturing of essential medical supplies. Reflecting a judicious approach, the Day Past Due criterion is set at 90 days as of 31st March 2021.
Further demonstrating its commitment to vital sectors, ECLGS 4.0 offers substantial assistance of up to Rs. 2 Crore. This support is earmarked for the establishment of cutting-edge technologies, such as Pressure Swing Adsorption, specifically designed for on-site oxygen-producing plants. The scheme’s foresight aligns with the imperative needs of the healthcare ecosystem, symbolising a balanced and considerate strategy in the wake of unprecedented challenges.
Insights and Tips for Navigating the ECLGS Landscape
Navigating the nuances of the Emergency Credit Line Guarantee Scheme (ECLGS) demands a strategic approach. Here are key considerations applicable across all components to guide you in making informed decisions:
1. Diverse Eligibility Criteria:
The scheme welcomes a diverse range of entities, encompassing Business Enterprises and MSMEs in various legal forms, such as Proprietorship, Partnership, registered companies, trusts, and Limited Liability Partnerships (LLPs). This inclusivity ensures a broad spectrum of businesses can benefit.
2. Individuals in Business:
ECLGS extends its coverage to individuals and proprietorship firms engaged in business activities. Specific categories under ECLGS 1.0 and 3.0 cater to the unique needs of these entities, offering a tailored financial solution.
3. Existing Customer Advantage:
The Scheme prioritises existing relationships, providing benefits to customers already on the books of Member Lending Institutions (MLIs). This not only streamlines the application process but also fosters continuity in financial partnerships.
4. Strategic Days Past Due Assessment:
A crucial aspect involves evaluating the Days Past Due status on specific reference dates (29.02.2020/31.03.2021/31.01.2022). Thorough scrutiny across all lending institutions, facilitated by credit bureau checks, is imperative for eligibility assessment.
5. Prudent Handling of NPA or SMA-2 Accounts:
While the scheme is inclusive, specific criteria exclude accounts with NPA or SMA-2 status on specified dates. It’s essential to note these limitations. Nevertheless, a thoughtful exception is made for specific overdues related to credit card/savings account/current account, adding a layer of flexibility.
Incorporating these considerations into your decision-making process ensures a nuanced understanding of the ECLGS landscape, maximising the benefits available for your specific business scenario.
Conclusion
Potential beneficiaries must clearly understand the eligibility criteria for the GECL loan, including the broader ECLGS framework and cash credit loan options. This understanding will not only help in a smooth application process but also ensure the effective utilization of this crucial financial support.
