Why ECLGS Scheme is Extended up to Next Year for MSME Registration?

The Emergency Credit Line Guarantee Scheme or ECLGS was launched as a part of the Atma Nirbhar Bharat package. The Government approved this for aiding the Micro, Small, and Medium Enterprise (MSME) borrowers to recover from the loss caused during the COVID-19 pandemic. This scheme gave comprehensive coverage of up to Rs.3.7 lakh crore to support the MSMEs.

Why was ECLGS extended up to next year?

The Government organised ECLGS was extended till March 31, 2022. Its objective was to help small and medium business organisations to recover from their losses during pandemic.

However, during Union Budget 2022, finance minister Nirmala Sitharaman made an announcement to extend ECLGS until March 2023 with an increased coverage by Rs.50,000 crore. As a result, the scheme’s total limit went up to Rs.5 lakh crore from Rs.4.5 lakh crore.

According to the Finance Minister, credit guarantee trust for micro small enterprises scheme (CGTMSE) will improve and provide further credit of Rs.2 lakh crore to MSEs, thereby enhancing employment.

What is the ECLGS under MSME registration?

The Emergency Credit Line Guarantee (ECLG) scheme was launched by the Government for offering MSME loans to help Indian MSMEs financially. Following are some remarkable features of this scheme. They are:

• It is a part of Rs.20 lakh crore cash incentive scheme of the Indian government.
• It will improve India’s economy besides helping small and underprivileged enterprises that suffered during epidemic.
• Rs.3 lakh crore is put aside as guarantee so that borrowers for MSMEs are not hindered due to lack of collateral.
• The National Credit Guarantee Trustee Company guarantees the entire loan amount under this scheme.
• Under this initiative, financial institutions offer emergency credit to companies with Udyam Registration that suffered during the lockdown.
• MSMEs can apply for a business loan effortlessly without any mortgage.
• Moreover, ECLGS offer a lower interest rate at 14% per annum than unsecured loans.

Financial institutions extend pre-approved facilities that speed up the lending process. They provide these offers on various financial products like personal loans and business loans.  Applicants can check their pre-approved offers by inserting details like their names and contact numbers.

ECLGS 4.0 – Extension of the scheme

On May 31 2021, Government of India organised the expansion of ECLGS. Under the version of ECLGS 4.0:

• The Government offer loans of up to Rs.2 crores with 7.5% interest to hospitals, medical colleges, and clinics under this scheme.
• With this scheme, potential borrowers who used to get a tenor of four years can get five years of loan tenor.
• Additional fund assistance of up to 10% of the outstanding amount to borrowers covered under the first ECLGS.
• The Government is withdrawing the maximum borrowable loan amount of Rs.500 crores under ECLGS 3.0.
• The maximum ECLGS finance to every borrower has been restricted to Rs.200 crores or 40%, whichever is lesser.

If an applicant finds difficulty, he/she can go through the commonly asked questions around business loans before deciding.

Entrepreneurs running a small business and having financial shortage can go for MSME loans as it is an efficient financing solution for MSMEs. However, the tremendous drawback of the economy, especially due to pandemic, has made many business organizations decline. Thus, in order to overcome this loss, the ECLGS program came into the picture to support the MSMEs.