What Is  ECLGS?

The COVID-19 pandemic and subsequent lockdowns dealt a severe blow to micro, small and medium enterprises (MSMEs) across India. With revenues drying up and operational costs still to be met, many MSMEs found themselves facing a severe liquidity crunch. Access to fresh lines of credit in India became challenging even for viable MSMEs.

It was in this context that the government announced the Emergency Credit Line Guarantee Scheme (ECLGS) in May 2020 as part of the Atma Nirbhar Bharat package. The objective was to enable MSMEs to meet their operational liabilities and restart operations by providing them with access to additional funding lines of credit India. Let’s take a closer look at this scheme.

What is the ECLGS Scheme?

The ECLGS is a loan guarantee scheme administered through the National Credit Guarantee Trustee Company (NCGTC). Under this scheme, the NCGTC provides a 100% guarantee to banks, NBFCs, and other lending institutions against the line of credit in India they extend via the Guaranteed Emergency Credit Line (GECL) to eligible MSME borrowers.

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The GECL provides access to a new line of credit in India up to 20% of the borrower’s total outstanding credit up to Rs.50 crores as of 29th February 2020. The GECL credit line can be easily availed by MSMEs through credit limit app services offered by various lenders under the ECLGS scheme.
The GECL aims to provide an immediate line of credit in India to qualified MSME borrowers.

Objectives of the ECLGS Scheme

1. To provide emergency credit access for MSMEs to meet their operational liabilities and restart operations

The ECLGS aimed to provide an emergency line of credit in India to MSMEs to help them manage their operational liabilities and restart operations that were adversely impacted by the lockdowns imposed due to COVID-19. This objective was to provide immediate liquidity support to distressed MSMEs.

2. To provide loans at a capped interest rate of 9.25% for banks and 14% for NBFCs

The scheme mandated that loans provided under ECLGS will have a capped interest rate – 9.25% for banks and FIs and 14% for NBFCs. This ensured the affordability of loans for MSME borrowers.

3. To provide collateral-free, fully guaranteed funding to eligible borrowers

The NCGTC provided a 100% guarantee on funding under ECLGS. Thus MSMEs could avail collateral-free loans under the scheme. This removed a significant obstacle faced by MSMEs in accessing finance.

4. To revive COVID-19-impacted sectors by providing additional funding

ECLGS provided up to 20% of outstanding credit to eligible sectors to help them withstand the economic shocks of the pandemic. The expansion of ECLGS to stressed sectors further aided revival.

Who is Eligible For ECLGS Scheme?

Initially, the ECLGS was available for MSMEs with up to Rs.25 crores outstanding and Rs.100 crores turnover to avail fresh lines of credit in India. The eligibility criteria were later expanded in November 2020 via ECLGS 2.0. Currently, the eligibility criteria are:

  • Businesses with up to Rs.250 crores turnover and up to Rs.50 crores outstanding credit as of 29th February 2020
  • Credit outstanding across all lending institutions up to or less than 30 days past due as of 29th Feb 2020
  • Individual borrowers for business purposes are also eligible to avail lines of credit in India under ECLGS

Loans covered under ECLGS 2.0 have a 5-year loan repayment period with a 1-year moratorium on repayment of the principal.

Expansion of the ECLGS Scheme

The ECLGS has been expanded and modified several times to provide relief to pandemic-affected sectors:

  • ECLGS 2.0 – Expanded eligibility to hospitals, nursing homes, healthcare providers, the civil aviation sector, and 26 stressed sectors identified by the Kamath Committee
  • ECLGS 3.0 – Focused on hospitality, travel & tourism, and leisure & sporting sectors
  • ECLGS 4.0 – 100% guarantee cover for loans up to Rs.2 crores to hospitals/nursing homes for on-site oxygen generation plants at a 7.5% interest rate

The ECLGS has played a crucial role in enabling MSMEs to withstand the economic shocks of the pandemic. As of 31st December 2021, guarantee amounting to Rs.3.61 lakh crores had been issued, which has supported the sanction of Rs.3.97 lakh crore across 126 lakh accounts.

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Importance of the ECLGS Scheme for MSMEs

Provided immediate liquidity support to MSMEs

  • The ECLGS provided an emergency line of credit in India to MSMEs facing severe liquidity crunch due to the COVID-19 pandemic and lockdowns.
  • This helped them meet their operational liabilities and eased their cash flow constraints.

The timely liquidity support in the form of a line of credit in India prevented the collapse of many MSMEs in the face of zero revenues during lockdowns.

Helped MSMEs restart and continue operations

  • The liquidity provided under ECLGS helped MSMEs resume their business operations once lockdowns were lifted.
  • It enabled them to restart production cycles, re-employ labor, and rebuild operations.
  • Thus, the scheme allowed MSMEs to not just survive the pandemic but also revive their businesses by providing timely line of credit in India.

Showcased the impact of timely government intervention

  • The ECLGS underscored how critical government intervention is for MSMEs in times of crisis by providing a line of credit in India when needed.
  • It showcased that well-targeted policy support at the right time can help important sectors cope with external shocks.
  • This can serve as a template for future economic crisis responses by governments through line of credit in India schemes.

MSMEs remain vulnerable and need sustained support

  • Despite the temporary relief from ECLGS, MSMEs remain vulnerable to disruptions even now.
  • Sustained policy support in the form of an easier line of credit in India access, technology upgrades, market access, etc. is key.
  • The governments should continue to find innovative ways to support MSME growth and resilience through access to line of credit in India.

Expansion Of The Scheme :- ECLGS 4.0

The ECLGS 4.0 scheme, announced on May 31, 2021, marks an expansion of the existing program. Here are the key revisions:

  1. Hospitals, nursing homes, clinics, and medical colleges are now eligible for a 100 percent guarantee cover on loans up to Rs 2 crores, with an interest rate fixed at 7.5 percent. These loans are intended for the establishment of on-site oxygen generation plants.
  2. Borrowers who previously had a loan tenure of four years can now extend it to five years.
  3. Borrowers covered under ECLGS 1.0 can now access additional assistance of up to 10% of the outstanding amount as of February 29, 2020.
  4. The previous loan ceiling of Rs. 500 crore under ECLGS 3.0 has been removed.
  5. The maximum additional assistance for each borrower is capped at 40% of the outstanding amount or Rs. 200 crore, whichever is lower.
  6. The civil aviation sector is now included as an eligible borrower under ECLGS 3.0.


The Emergency Credit Line Guarantee Scheme has been a lifeline for MSMEs during the COVID-19 pandemic. It has helped alleviate the sudden liquidity crunch faced by small businesses and aided in their survival and recovery. The ECLGS sets a template for countercyclical government intervention during economic crises. Budget 2024 also have innovations in the ECLGS Scheme.

Timely delivery of line of credit India support through innovative schemes like ECLGS can rescue productive sectors of the economy from collapse in times of external shocks. The success of ECLGS reinforces the need for a sustained policy focus on enabling access to affordable credit for MSMEs even in normal times. The resilience and growth of MSMEs is crucial for India’s larger economic goals. There are 5 New Government MSME schemes which you must look after once.


1. What is the key benefit of the ECLGS for MSMEs?

The ECLGS provides guaranteed and collateral-free loans to MSMEs at capped interest rates. This has helped numerous MSMEs meet their working capital needs and stay afloat during the COVID crisis.

2. Who provides the guarantee for loans under the ECLGS?

The National Credit Guarantee Trustee Company (NCGTC) provides a 100% guarantee for loans provided by lending institutions under the ECLGS.

3. Which sectors are eligible under the expanded ECLGS scheme?

The ECLGS eligibility has been expanded to cover 26 stressed sectors identified by the Kamath Committee, the healthcare sector, civil aviation sector, and firms in hospitality, travel & tourism, and leisure & sporting sectors.

By indifi

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