Union Cabinet approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0

Union Cabinet approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0

¨     Union Cabinet approved the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0.

¨     The scheme is designed to provide liquidity support to eligible borrowers.

¨     ECLGS was first launched in 2020 during the COVID-19 pandemic.

¨     The objective of the scheme was to provide additional loans to stressed businesses without extra collateral.

¨     It is a government-backed credit guarantee framework for lending institutions.

¨     Under the scheme, the government provides guarantees on loans issued by banks and financial institutions.

¨     The scheme mainly benefits Micro, Small and Medium Enterprises (MSMEs).

¨     It provides additional working capital assistance to eligible entities.

¨     Certain other notified borrower categories are also covered under the scheme.

¨     The aim of ECLGS is to maintain business stability and support economic activity.

Key Features of ECLGS

¨   The scheme uses a sovereign guarantee mechanism to reduce lender risk on sanctioned credit.

¨ The scheme has been linked to collateral-free or partially collateral-free lending in its earlier versions.

¨   The scheme has been implemented through banks and other eligible financial institutions.

¨     The scheme has been extended in multiple versions since its launch in 2020.