Top Things to Consider for ECLGS to Grow MSMEs Stronger in 2021

0
ECLGS-scheme

The MSME sectors faced partial challenges in terms of generating revenues last year following the nationwide lockdown. As a result, this sector encountered considerable losses in business continuity, coupled with a liquidity crunch and immersing demand from the public.  

Amidst this critical situation, the Government of India introduced the ECLGS scheme-Emergency Credit Line Guarantee Scheme, a beneficial scheme for boosting and reviving the MSME sectors hit by pandemic.

Things to consider for ECLGS scheme to boost MSMEs in 2021

Announced as a part of the COVID-19 relief package by the Central Government of India, the ECLGS scheme aims to provide 100% guaranteed financial coverage of up to Rs.3 lakh to revive the MSMEs and business enterprises. 

Backed by the Indian Government, financial institutions can provide emergency credit facilities to MSMEs and business enterprises that the coronavirus-induced lockdown has hit. Eligible MSME sectors belonging to proprietorships, registered companies, partnerships etc., can avail this guaranteed emergency credit line (GECL) to meet their working capital needs and other functional expenses. 

This scheme comes in four forms: ECLGS 1.0, ECLGS 2.0, ECLGS 3.0, and ECLGS 4.0, and each of these forms offers different benefits.

  • ECLGS 1.0

This scheme offers guaranteed credit for the businesses whose total outstanding credit is up to Rs.50 crore as of February 29, 2020. This scheme is provided to the companies that surpass other companies regarding credit loan applications.

  • ECLGS 2.0-

In this scheme, the applicants can avail funds more than Rs.50 crore and less than Rs.500 crore.

  • ECLGS 3.0

Under this ECLGS scheme, sectors like tourism and travel, hospitality, sports etc., are included. This scheme is available for businesses whose total credit outstanding is not exceeding Rs.500 crore.

  • ECLGS 4.0

To provide financial assistance to the MSME sectors, the Government of India declared a three-month extension of Rs.3 lakh crore ECLGS scheme to September 30, 2021, from June 30, 2021, and guarantees an amount of Rs.3 lakh.

Features of ECLGS

Following are the features of ECLGS scheme that borrowers should know-

  • As per the Government rules and regulations, the maximum amount that can be availed under this scheme is Rs.3 lakh crore.
  • One of the primary aims of this scheme is to provide financial assistance to the micro and small businesses to manage working capital, upgrade machinery, recruit staff and maintain financial stability in the pandemic situation.
  • This scheme is provided to MSMEs, registered companies, small companies etc., looking for a business loan to establish or expand their businesses.

Borrowers must note that to avail benefits under this scheme, they need to meet certain eligibility parameters, which is one of the essential criteria for business loan application approval.

Eligibility criteria for ECLGS scheme

The eligibility parameters for this scheme are mentioned below-

  • The borrower must be a member of GST registrar. This is one of the main criteria that need to be fulfilled before applying for this scheme to avail MSME loans.
  • Candidates with SMA 2 or NPA are not eligible to avail funds under this scheme. However, there are no additional eligibility requirements other than the mentioned factors.
  • Due to the February 29, 2020 clause, candidate’s account must be at least older than 60 days.

Besides meeting these set eligibility parameters under ECLGS scheme, individuals need to know the application procedure.

How to apply for Emergency Credit Line Guarantee scheme?

Business enterprises and MSMEs can avail this scheme from any financial institution, be it commercial or NBFCs. Existing or pre-authorised users can conveniently avail this scheme. However, users who are signing up cannot avail this scheme. To apply for this scheme, individuals need to follow the eligibility requirements.

Borrowers applying for loans under this scheme from reputed NBFCs like Bajaj Finserv can enjoy pre-approved offers to further streamlining and accelerate the loan application process. These offers are extended on a host of secured and unsecured financial products such as business loans, credit cards, personal loans, etc. Prospective borrowers can check their pre-approved offers online by submitting their name and contact details.

Thus, to ensure the optimal functioning of MSMEs in India, the Government launched the ECLGS scheme to benefit the country socially and economically. This scheme aims to reduce the economic stress faced by the MSMEs during this pandemic and provide additional funding in the form of ECLGS. These are the things that need to be considered while applying for this scheme.

LEAVE A REPLY

Please enter your comment!
Please enter your name here