ECLGS Scheme is a government initiative in India to help small businesses stay afloat during the COVID-19 pandemic. The scheme offers low-interest loans to small businesses so that they can continue to operate and grow. This article will explain how the scheme works and how it has helped MSMEs in India.
What is ECLGS Scheme?
The Emergency Credit Line Guarantee Scheme (ECLGS) is a government-backed scheme that provides financial support to small businesses in India. The scheme was launched in 2020 in response to the COVID-19 pandemic and is designed to help small businesses cope with the economic impacts of the pandemic.
Under the scheme, eligible businesses can access credit of up to 20% of their total outstanding loan amount, up to a maximum of INR 5 crore. The credit is guaranteed by the government and can be used for working capital or other business purposes.
The scheme has been instrumental in helping small businesses in India weather the economic impact of the COVID-19 pandemic. In the first six months of the scheme, over 4 million loans were approved, totaling over INR 1 trillion. This has helped to keep small businesses afloat and protect jobs during a time of crisis. The ECLGS scheme is set to expire on March 31, 2021. However, given the continued impact of the pandemic on small businesses, it is likely that the scheme will be extended beyond this date.
How is ECLGS related to MSMEs’ Business Growth?
The ECLGS scheme is designed to support MSMEs in India by providing them with low-cost working capital. The scheme is expected to help MSMEs maintain their business growth during these challenging times. By making it easier for MSMEs to access working capital, the ECLGS scheme is helping to ensure that these businesses can continue to operate and grow. This is good news for the Indian economy, as MSMEs are a key driver of economic growth.
Benefits and features of the ECLGS Scheme
The ECLGS Scheme is a great way for MSMEs to keep their businesses growing in India. The scheme provides a number of benefits and features that make it an attractive option for small businesses.
One of the main benefits of the ECLGS Scheme is that it offers a 100% guarantee on loans from banks and financial institutions. This means that MSMEs can take out loans without having to worry about repayment, as the government will cover any losses incurred by the lender.
Another benefit of the scheme is that it offers interest-free loans for up to four years. This gives MSMEs a great opportunity to invest in their businesses without having to worry about high interest rates.
Finally, the ECLGS Scheme also provides access to credit enhancement facilities. These facilities can help MSMEs obtain loans at lower interest rates, which can save them money in the long run.
Overall, the ECLGS Scheme is a great way for MSMEs to keep their businesses growing in India. The scheme offers a number of benefits and features that make it an attractive option for small businesses.
Effect of ECLGS Scheme on MSME loan interest rate
The interest rate on MSME loans in India has decreased significantly since the launch of the Emergency Credit Line Guarantee Scheme (ECLGS). The scheme, which was launched in May 2020 in response to the COVID-19 pandemic, provides a 100% guarantee on loans up to Rs 3 crore for eligible MSMEs. This has resulted in a decrease in the interest rate on an MSME loan, making it easier for businesses to access credit and grow their operations.
The ECLGS scheme has had a positive impact on the growth of MSMEs in India. Businesses have been able to access credit at lower interest rates, which has helped them to invest in new equipment and expand their operations. The scheme has also helped to create new jobs, as businesses have been able to take on new employees to support their growth.
The ECLGS scheme is expected to continue supporting the growth of MSMEs in India over the coming months and years. This will help to further boost the Indian economy and create more jobs.
Intention and motive to create the ECLGS Scheme
The Emergency Credit Line Guarantee Scheme (ECLGS) was announced by the Finance Minister on 26th May 2020 as a part of the Aatmanirbhar Bharat Abhiyan package. The scheme is aimed at providing collateral-free working capital term loans of up to 20% of the total outstanding credit of a business as on 29th February 2020, with a maximum loan amount of Rs. 3 crore. The scheme is applicable to all Micro, Small and Medium Enterprises (MSMEs), including sole proprietorships, partnership firms and companies that have a maximum outstanding loan amount of Rs. 25 crore as on 29th February 2020.
The primary motive for creating the ECLGS Scheme was to ensure that businesses, especially MSMEs, hit by the COVID-19 pandemic are able to continue their operations and restart their businesses without any hindrance. The scheme is also intended to boost the confidence of MSMEs and help them tide over the period of uncertainty caused by the pandemic.
The scheme is being implemented through participating banks and financial institutions, and has been operationalised from 3rd June 2020. As per the latest data released by the Ministry of Finance, over 9 lakh MSMEs
The ECLGS scheme is undoubtedly a boon for MSMEs in India. It has provided much-needed support to businesses during these difficult times and has helped them stay afloat. The scheme has also given a boost to the economy by keeping MSMEs in business and ensuring that they continue to grow. We hope that the scheme will continue to be a success and help MSMEs in India to thrive.