New Delhi: The Union Cabinet on Wednesday approved the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs and MUDRA borrowers. Also Read - Centre to Further Revise Criteria For Classifying 'Medium' Enterprises Under MSME Definition: Gadkari

Under the Scheme, 100 per cent guarantee coverage would be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for the additional funding of up to Rs 3 lakh crore in the form of a ECLGS facility. Also Read - Rs 3 Lakh Crore Collateral-free Loans Will Boost Liquidity, Empower MSMEs, Says PM Modi



An official statement said that to this purpose, a corpus of Rs 41,600 crore shall be provided by the Centre, spread over the current and the next three financial years. Also Read - From MSMEs to Income Tax Returns: Nirmala Sitharaman's Briefing on Rs 20 Lakh cr Package | Highlights

The Cabinet also approved that the scheme would be applicable to all loans sanctioned under ECLGS during the period from the date of announcement of the scheme to October 31, 2020, or till an amount of Rs 3 lakh crore is sanctioned under the ECLGS, whichever is earlier.



The ECLGS has been formulated as a specific response to the unprecedented situation caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.

The main objective of the scheme is to provide an incentive to Member Lending Institutions (MLIs), including banks, financial institutions, and non-banking financial companies (NBFCs) to increase access to and enable availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis, by providing them 100 per cent guarantee for any losses suffered due to non-repayment of the ECLGS funding by borrowers.

All MSME borrower accounts with outstanding credit of up to Rs 25 crore as on February 2020, which were less than or equal to 60 days past due as on that date and with an annual turnover of up to Rs 100 crore, would be eligible for collateral-free loan under the scheme.

The amount of ECLGS funding to eligible MSME borrowers will either be in the form of additional working capital term loans in case of banks or additional term loans in case of NBFCs and it would be up to 20 per cent of their entire outstanding credit up to Rs 25 crore as on February 29, 2020.