According to official data, 117.87 lakh firms have received 100% guaranteed collateral-free loans under the emergency credit line guarantee programme (ECLGS) through March 11, 2022. Approximately 95% of these were micro, small, and medium-sized businesses (MSMEs). This information was just provided by the government in Parliament.
So, let us learn more about this programme.
What exactly is ECLGS?
When the Coronavirus-induced nationwide lockdown was in effect in May 2020, the government introduced ECLGS as part of the Aatma Nirbhar Bharat package.
The ECLGS scheme, which was designed specifically to assist MSMEs because they were the worst impacted by the interruption, offers a 100 per cent guarantee to member lending institutions (MLIs) in respect of loan facilities given to qualifying borrowers under the scheme.
While presenting the Union Budget for 2022-23, Finance Minister Nirmala Sitharaman said that ECLGS will be extended through March 2023, and it is currently available until March 31, 2023.
How does ECLGS operate?
The scheme’s structure enables quick access to credit since lenders give pre-approved loans based on the borrower’s current credit outstanding. There is no need for lenders to do a new assessment because extra credit is sanctioned in addition to the credit facilities previously appraised.
In addition, the interest rate is regulated in order to reduce the cost of credit, and loans are approved without any processing fees, prepayment penalties, or guarantee fees.