Emergency Credit Line Guarantee Scheme (ECLGS) Guaranteed Emergency Credit Line (GECL)
Pre-approved loan sanction for Business Enterprises / Micro, Small and Medium Enterprise (MSME) borrowers, including interested PMMY borrowers
Government of India through Ministry of Finance, Department of Financial Services has introduced the Emergency Credit Line Guarantee Scheme (#ECLGS) for providing 100% guarantee coverage for additional working capital term toans (in case of Banks and Fts) and additional term loans (in case of NBFCs) upto 20% of their entire outstanding credit upto RS.2S crore Le. upto Rs.5 crore, as on February 29, 2020, subject to the account being less than or equal to 60 days past due as on that date.
Key features of Scheme:
1. Name of the Scheme: The Scheme shall be named as ‘Emergency Credit Line Guarantee Scheme (ECLGS)’ (hereinafter referred as the ‘Scheme’) and the credit product for which guarantee would be provided under the Scheme shall be named as ‘Guaranteed Emergency Credit Line (#GECL).
2. Purpose of the Scheme: To provide 100% guarantee coverage for the GECL, which shall be a pre-approved sanction limit of up to 20% of loan outstanding as on 29th February, 2020 to eligible borrowers, in the form of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs) from all Member Lending Institutions (#MLIs) to eligible Business Enterprises / Micro, Small and Medium Enterprise (#MSME) borrowers, including interested PMMY borrowers , in view of COVID-19 crisis, as a special Scheme.
3. Eligible Borrowers:
• All Business Enterprises /MSME borrower accounts with combined outstanding loans across all MLIs of up to Rs. 25 crore as on 29.2.2020, and annual turnover of up to Rs. 100 crore for FY 2019-20 are eligible for the Scheme. MLIs are expected to check with credit bureau the overall outstanding of the borrower to assess the eligibility of the borrower.
• Loans provided to Business Enterprises / MSMEs constituted as Proprietorship, Partnership, registered company, trusts and Limited Liability Partnerships (LLPs) shall be eligible under the Scheme. For instance, any existing loan such as CV loan taken by an entity shall be covered but CV loan taken by promoter or director in personal capacity shall not be covered.
• For the purpose of this Scheme, Business Enterprises / MSMEs would include loans covered under Pradhan Mantri Mudra Yojana extended on or before 29.2.2020, and reported on the MUDRA portal. All eligibility conditions including the condition related to Days past due would also apply to PMMY loans.
• For loans having co-applicant, only those existing loans where entity is the primary co-applicant are covered under the Scheme for additional emergency funding.
• Loans provided in individual capacity are not covered under the Scheme.
• The Scheme is valid for existing customers on the books of the MLIs. Borrower accounts should be less than or equal to 60 days past due as on 29th February, 2020 in order to be eligible under the Scheme. i.e. All borrowers which have not been classified as SMA 2 or NPA by any of the MLIs as on 29th February, 2020 will be eligible for the Scheme
• Days Past Due status as on 29.2.2020 to be checked across MLIs from credit bureau.
• Business Enterprises / MSME borrower accounts which had NPA or SMA-2 status as on 29.2.2020 shall not be eligible under the Scheme.
• Business Enterprises / MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to Business Enterprises / MSMEs that are not required to obtain GST registration.
• An ‘opt-out’ option should be provided to the eligible Business Enterprises / MSME borrowers to enable them to choose whether they wish to opt out of the GECL facility.
• For the purpose of this Scheme it is not necessary that the existing loans of the borrowers should be covered under the existing NCGTC or CGTMSE Scheme.
4. Loan Amount eligible under the Guarantee Coverage:
• The amount of GECL funding to eligible Business Enterprises / MSME borrowers either in the form of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs) would be up to 20% of their total outstanding loans up to Rs. 25 crore as on 29th February, 2020, subject to the borrower meeting all the eligibility criteria.
• Total Outstanding Amount would comprise of the on-balance sheet exposure such as outstanding amount across WC loans, term loans and WCTL loans. Off-balance sheet and non-fund based exposures will be excluded.
• MLIs are expected to check with credit bureau the overall outstanding of the borrower to assess the overall additional loan amount eligible for sanction under the Scheme.
• MLIs would be required to open a separate account for Credit Facility extended through the Scheme
• Loans extended through current Government schemes such as PMEGP, PMMY etc. would continue to be categorized under that scheme as earlier. WCTL/Term Loans under this Scheme shall be over and above the existing loan.
• In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or multiple lenders depending upon the agreement between the borrower and the MLI.
• In case the borrower wishes to take from any lender an amount more than the proportional 20% of the outstanding credit that the borrower has with that particular lender, a No Objection Certificate (NOC) would be required from all other lenders.
• No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20% of the outstanding credit that the borrower has with that lender.
• MLIs are expected to have simple and enabling criteria to assess the borrower eligibility. Since the loans are being provided to existing borrowers it is expected that the time required for due diligence would be minimal in nature. MLIs should work towards enabling access of this facility to all the eligible borrowers by educating borrowers regarding the Scheme and steps to avail credit under the Scheme.
5. Interest Rate of Credit under the Scheme:
Interest Rate on GECL shall be capped as under:
• For Banks and FIs, lending rate linked to one of the external benchmark rates prescribed by RBI +1% subject to a maximum of 9.25% per annum.
• For NBFCs, the interest rate on GECL shall not exceed 14% per annum.
• Since the additional pre-approved facility is to be provided to existing customers, no additional processing fee shall be charged by MLIs to borrowers.
• No penal interest due to any non-compliance of the already accepted covenants on the existing credit facilities may be charged on additional loans during the sanction time.
6. Nature of account and Tenor of Credit under the Scheme:
• A separate loan account should be opened for the borrower, distinct from the existing loan account(s), for coverage under the Scheme.
• The tenor of loans provided under GECL shall be for a tenor of four years from the date of disbursement. No pre-payment penalty shall, however, be charged by the MLIs in case of early repayment.
• Moratorium period of one year on the principal amount shall be provided to borrowers for the GECL funding during which interest shall be payable
• The principal shall be repaid in 36 installments after the moratorium period is over.
• Pre-payment of facilities to be allowed at no additional charge to the borrower.
• The account may be operated in combination with applicable Interest Subvention Scheme(s) as far as feasible
• RBI’s approval has been solicited for keeping risk weight for loans provided under GECL at zero.
7. Eligible MLIs:
• MLIs for this purpose shall include all Scheduled Commercial Banks (SCBs), Non-Banking Financial Companies (NBFCs) and Financial Institutions (FIs), as specified above.
• All NBFCs which have been in operation for 2 years as on 29th February, 2020 would be eligible under the Scheme.
8. Guarantee Fee:
No Guarantee Fee shall be charged from the MLIs by NCGTC for the Credit facilities provided under the Scheme.