April 13, 2024

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Important Aspects You Should Know About ECLGS Scheme

3 min read

The Indian Government has taken one of the biggest steps to save COVID-affected businesses. As finance is the major stress for small businesses, it has released the Emergency Credit Line Guarantee Scheme. It is now easy to avail of the credit under this scheme. The Government has created a lifeline providing 100% guarantee coverage to financial institutions and banks. 

These financial bodies can offer SME loans to eligible borrowers. Under the ECLGS scheme, Small and medium enterprises can apply for the loan when they need working capital. However, before applying for the loan, you have to learn about the ECLGS scheme.

How much will be the interest rate for the ECLGS loan scheme?

Under the CLG scheme, RBI prescribed the lending rate for the FIs and banks. The rate must not be higher than 9.25% per annum (in the case of MSMEs and non-MSMEs). The non-banking financial corporations must not charge more than 14% per annum for the GECL loan. Some customers will get additional facilities. MLIs will not charge an additional fee to borrowers.

For the additional loans within the sanctioned period, there will be no penal interest. 

Amount of credit available with the loan scheme

The SME loan available to you is 20% of the total outstanding credit of MSMEs. The upper limit for the loan is Rs 500 crore. However, for borrowers in the travel, hospitality, sporting, and leisure industry, the credit is 40%. The upper limit is capped at Rs 200 crore.

ECLGS is applicable for those who have previously raised credit and have books of banks. 

The tenor of credit and nature of your account-

  • As the loan applicant, you need a different loan account for the ECLGS scheme.
  • According to ECLGS 1.0, the tenor can be 4 years from the day of loan disbursement. But, it is 5 years based on the ECLGS 2.0. Similarly, under the revised ECLGS 3.0 scheme, it will be 6 years from the disbursement date.
  • You can enjoy pre-payment facilities without any additional charge.

Repayment window and moratorium period

Based on your principal repayment amount, the moratorium period was 1 year for ECLGS 1.0 and ECLGS 2.0. But, for ECLGS 3.0, it is 2 years. With ECLGS 4.0, it is 6 years.

The processing charge for the loan

One of the advantages of the ECLGS term loan is that you do not need to pay a processing charge. Thus, choosing the right lender and apply for the loan. 

Registered lenders for the loan

According to the latest declarations 2020, 22 private banks and 12 public sector banks are the registered lenders to provide you the loan. Moreover, 127 NBFCs and 42 regional rural banks are eligible for the loan under the ECGLS scheme.

Which are eligible enterprises under the Emergency Credit Line Guarantee Scheme?

Check out the types of Business Enterprises eligible for emergency credit-

  • Partnerships
  • Proprietorships
  • Registered Companies
  • Borrowers under the scheme- Pradhan Mantri MUDRA Yojana 
  • Trusts and Limited Liability Partnerships

Emergency Credit Line Guarantee is truly an ambitious Scheme providing several benefits to small enterprises. It is a part of the Atmanirbhar Bharat package. The Government decided to allocate Rs 3.7 lakh crore as the funding package for MSMEs. As the biggest credit guarantee scheme, the SME loan has assisted several COVID-battered MSMEs in India. More than 45 lakh business units can restore their operations and protect their employees’ jobs.

You can try to learn more about the scheme to apply for the SME loan. Make sure that you have selected a reliable and registered lender for the loan. You can revamp your business in this pandemic with collateral-free loans.

In case you do not meet the required eligibility criteria, you can apply for an unsecured business loan as an alternative financial solution. Bajaj Finserv, one of the leading financial institution offers collateral-free finance for business with minimal documents.

Read Also: All You Need to Know About Home Loan Interest Rates

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