Emergency Credit Line Guarantee Scheme (ECLGS): Modi government's boost for MSMEs, NBFCs! Rs 79k cr sanctioned by banks

Modi government's schemes for MSMEs and NBFCs have started creating significant impact as sanctions under Emergency Credit Line Guarantee Scheme (ECLGS) have crossed whopping Rs 79,000-crore mark. Under the Emergency Credit Line backed by a Government guarantee, Banks from Public and Private Sectors have so far already sanctioned loans worth over Rs 79,000 crore as of June 20, 2020, of which more than Rs 35,000 crore has already been disbursed. This signifies that the interventions by Modi government for MSMEs, have been gaining rapid traction.  

The top lenders under the Scheme are SBI, HDFC Bank, Bank of Baroda, PNB and Canara Bank. This has helped 19 lakh MSMEs and other businesses restart their businesses post the lockdown. As part of the Aatmanirbhar package Government had announced its plans for Rs. 3 lakh Crore as additional credit to MSMEs and small businesses. Such enterprises were to be eligible to receive up to 20% of their existing borrowing as additional loans at interest rates which were capped.

Emergency Credit Line Guarantee Scheme (ECLGS)

The Modi government in May introduced the Emergency Credit Line Guarantee Scheme (ECLGS) for providing 100 per cent guarantee coverage for additional working capital term loans (in case of banks and financial institutions) and additional term loans (in case of NBFCs) up to 20 per cent of their entire outstanding credit up to Rs 25 crore as on February 29, 2020. The credit facility is guaranteed by the National Credit Guarantee Trustee Company (NCGTC).

Separately, under RBI’s Special Liquidity Facility announced in March-April, 2020, SIDBI has sanctioned over Rs. 10,220 crore to NBFCs, Micro Finance Institutions and Banks for lending to MSME and small borrowers.  National Housing Bank (NHB) has sanctioned its entire facility of Rs 10,000 crore to Housing Finance Companies.  This re-finance by SIDBI and NHB is in addition to ongoing schemes through which over Rs. 30,000 crore has been sanctioned. NBFCs and MFIs are being further helped under the Extended Partial Guarantee Scheme where approvals have crossed Rs. 5500 crore.

Transactions for another Rs. 5000 crore are under process of approval while certain other deals are currently under negotiation.