Detailed Guidelines & FAQs of Emergency Credit Line Guarantee Scheme for all Business Enterprises/MSME Institution borrowers with loans of up to Rs. 25 Cr. & annual turnover of up to Rs. 100 Cr.

The Emergency Credit Line Guarantee Scheme (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 Scheme aims at mitigating the economic distress being faced by MSMEs by providing them additional funding of up to Rs. 3 lakh crore in the form of a fully guaranteed emergency credit line. The main objective of the Scheme is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) 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 by them due to non-repayment of the GECL funding by borrowers.

1. Salient features of the Emergency Credit Line Guarantee Scheme (ECLGS)

1. All MSME borrower accounts with outstanding credit of up to Rs. 25 crore as on 29.2.2020 which were less than or equal to 60 days past due as on that date, i.e., regular, SMA 0 and SMA 1 accounts, and with an annual turnover of up to Rs. 100 crore would be eligible for GECL funding under the Scheme.

2. The amount of GECL funding to eligible MSME borrowers either in the form of additional working capital term loans (in case of banks and FIs), or additional term loans (in case of NBFCs) would be up to 20% of their entire outstanding credit up to Rs. 25 crore as on 29th February, 2020.

3. The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.

4. Tenor of loan under Scheme shall be four years with moratorium period of one year on the principal amount.

5. No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.

6. Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

2. Implementation schedule of Emergency Credit Line Guarantee Scheme (ECLGS)

The Scheme would be applicable to all loans sanctioned under GECL during the period from the date of announcement of the Scheme to 31.10.2020, or till an amount of Rs three lakh crore is sanctioned under the GECL, whichever is earlier.

3. Expected Impact of Emergency Credit Line Guarantee Scheme (ECLGS)

The Scheme 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. In view of the critical role of the MSME sector in the economy and in providing employment, the proposed Scheme is expected to provide much needed relief to the sector by incentivizing MLIs to provide additional credit of up to Rs.3 lakh crore to the sector at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses. By supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.

4. Operational Guidelines for Emergency Credit Line Guarantee Scheme (ECLGS)

1. Name of the Scheme:

The Scheme shall be named as ‘Emergency Credit Line Guarantee Scheme (ECLGS)’ (hereinafter referred as the ‘Scheme’) and the credit product for which guarantee would be provided under the Scheme shall be named as ‘Guaranteed Emergency Credit Line (GECL)’

2. Purpose of the Scheme:

To provide 100% guarantee coverage for the GECL, which shall be a pre-approved sanction limit of up to 20% of loan outstanding as on 29th February, 2020 to eligible borrowers, in the form of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs) from all Member Lending Institutions (MLIs) to eligible Business Enterprises / Micro, Small and Medium Enterprise (MSME) borrowers, including interested PMMY borrowers , in view of COVID-19 crisis, as a special Scheme.

3. Date of commencement

Scheme shall come into force from the date of issue of these guidelines by NCGTC.

4. Definitions

For the purposes of this Scheme –

  • “Amount in Default” means the principal and interest amount outstanding in the account of the borrower in respect of term loan/working capital term loan facility (including interest) as the case may be, as on the date of the account becoming NPA, or on the date of lodgment of claim application, whichever is lower, or on such other date as may be specified by Trustee Company for preferring any claim against the guarantee cover subject to a maximum of amount guaranteed.
  • “Credit facility” means financial assistance provided under the Scheme by way of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs) extended by all Member Lending Institution (MLI) to eligible Business Enterprises / Micro, Small and Medium Enterprise (MSME) borrowers. The financial assistance provided as part of the Scheme is to be operated as a separate loan account.
  • “Eligible borrower” means all Business Enterprises / MSME institution borrower accountswith outstanding loans of up to Rs. 25 crore as on 29.2.2020, and annual turnover of up to Rs. 100 crore in FY 2019-20. In case accounts for FY 2019-20 are yet to be audited/finalized, the MLI may rely upon the borrower’s declaration of turnover. The Scheme is valid for existing customers on the books of the MLI. Borrower accounts should be less than 60 days past due as on 29th February, 2020 in order to be eligible under the Scheme. For the purpose of this Scheme, Business Enterprises / MSMEs would also include loans covered under Pradhan Mantri Mudra Yojana (PMMY). ‘Guarantee Cover’ means maximum cover available per eligible borrower of the amount in default in respect of the credit facility extended by the lending institution. For this Scheme, the guarantee coverage would be 100% of the amount in default.
  • “Member Lending Institution(s)” (MLI)
    • Banks: All Scheduled Commercial Banks.
    • Financial Institutions: As defined in sub-clause (i) of clause (c) of Section 45-I of Reserve Bank of India Act.
    • NBFC: “Non-Banking Financial Company” means a non-banking financial company as defined in clause (f) of section 45-I of the RBI Act, 1934 and which has its principal business as defined by RBI and has been granted a certificate of registration under sub-section (1) of section 3 of the Act. All NBFCs which have been in operation for 2 years as on 29th February, 2020 would be eligible under the Scheme.
  • “Non-Performing Assets” means an asset classified as non-performing based on the instructions and guidelines issued by the Reserve Bank of India from time to time
  • “Primary security” in respect of a credit facility shall mean the assets created out of the credit facility so extended
  • “Interest Rate” for a lending institution means the rate so declared by that lending institution from time to time as per Reserve Bank of India guidelines based on which interest rate applicable for the loan will be determined.
  • “Tenure of guarantee cover” means the maximum period of guarantee cover from the Guarantee sanction date, and it shall be co-terminus with the tenor of the loan under GECL

SCOPE AND EXTENT OF THE SCHEME

5. Eligible MLIs

  • MLIs for this purpose shall include all Scheduled Commercial Banks (SCBs), Non-Banking Financial Companies (NBFCs) and Financial Institutions (FIs), as specified above.
  • All NBFCs which have been in operation for 2 years as on 29th February, 2020 would be eligible under the Scheme.

6. Duration

  • The Scheme would be applicable to all loans sanctioned under GECL during the period from the date of issue of these guidelines by NCGTC to 31.10.2020, or till an amount of Rs 3,00,000 crore is sanctioned under the GECL, whichever is earlier.

7. Eligible Borrowers

  • All Business Enterprises /MSME borrower accounts with combined outstanding loans across all MLIs of up to Rs. 25 crore as on 29.2.2020, and annual turnover of up to Rs. 100 crore for FY 2019-20 are eligible for the Scheme. MLIs are expected to check with credit bureau the overall outstanding of the borrower to assess the eligibility of the borrower.
  • Loans provided to Business Enterprises / MSMEs constituted as Proprietorship, Partnership, registered company, trusts and Limited Liability Partnerships (LLPs) shall be eligible under the Scheme. For instance, any existing loan such as CV loan taken by an entity shall be covered but CV loan taken by promoter or director in personal capacity shall not be covered.
  • For the purpose of this Scheme, Business Enterprises / MSMEs would include loans covered under Pradhan Mantri Mudra Yojana extended on or before 29.2.2020, and reported on the MUDRA portal. All eligibility conditions including the condition related to Days past due would also apply to PMMY loans.
  • For loans having co-applicant, only those existing loans where entity is the primary co-applicant are covered under the Scheme for additional emergency funding.
  • Loans provided in individual capacity are not covered under the Scheme.
  • The Scheme is valid for existing customers on the books of the MLIs. Borrower accounts should be less than or equal to 60 days past due as on 29th February, 2020 in order to be eligible under the Scheme. i.e. All borrowers which have not been classified as SMA 2 or NPA by any of the MLIs as on 29th February, 2020 will be eligible for the Scheme
  • Days Past Due status as on 29.2.2020 to be checked across MLIs from credit bureau.
  • Business Enterprises / MSME borrower accounts which had NPA or SMA-2 status as on 29.2.2020 shall not be eligible under the Scheme.
  • Business Enterprises / MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to Business Enterprises / MSMEs that are not required to obtain GST registration.
  • An ‘opt-out’ option should be provided to the eligible Business Enterprises /MSME borrowers to enable them to choose whether they wish to opt out of the GECL facility.
  • For the purpose of this Scheme it is not necessary that the existing loans of the borrowers should be covered under the existing NCGTC or CGTMSE Scheme.
  • Some examples on the eligibility of the borrowers are indicated below
Name of the Borrower Overall Outstanding of the Borrower across MLIs (INR Crore) Overall Outstanding of the Borrower with MLI (INR

Crore)

DPD of borrower as on 29th Feb 2020

(Days)

Turnover as per latest available financials (INR Crore)
Borrower A 30 15 30 90 Not eligible
Borrower

B

30 15 62 90 Not eligible
Borrower C 25 25 59 75 Eligible
Borrower D 15 10 0 80 Eligible
Borrower E 20 10 0 125 Not Eligible

8. Loan Amount eligible under the Guarantee Coverage

  • The amount of GECL funding to eligible Business Enterprises / MSME borrowers either in the form of additional working capital term loan facility (in case of banks and Financial Institutions), and additional term loan facility (in case of NBFCs) would be up to 20% of their total outstanding loans up to Rs. 25 crore as on 29th February, 2020, subject to the borrower meeting all the eligibility criteria.
  • Total Outstanding Amount would comprise of the on-balance sheet exposure such as outstanding amount across WC loans, term loans and WCTL loans. Off- balance sheet and non-fund based exposures will be excluded.
  • MLIs are expected to check with credit bureau the overall outstanding of the borrower to assess the overall additional loan amount eligible for sanction under the Scheme.
  • MLIs would be required to open a separate account for Credit Facility extended through the Scheme
  • Loans extended through current Government schemes such as PMEGP, PMMY etc. would continue to be categorized under that scheme as earlier. WCTL/Term Loans under this Scheme shall be over and above the existing loan.
  • In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or multiple lenders depending upon the agreement between the borrower and the MLI.
  • In case the borrower wishes to take from any lender an amount more than the proportional 20% of the outstanding credit that the borrower has with that particular lender, a No Objection Certificate (NOC) would be required from all other lenders.
  • No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20% of the outstanding credit that the borrower has with that lender.
  • MLIs are expected to have simple and enabling criteria to assess the borrower eligibility. Since the loans are being provided to existing borrowers it is expected that the time required for due diligence would be minimal in nature. MLIs should work towards enabling access of this facility to all the eligible borrowers by educating borrowers regarding the Scheme and steps to avail credit under the Scheme.
  • Examples to calculate the loan amount covered under the Guarantee coverage:
 

 

Name of the Borrower

Overall Outstanding of the Borrower across MLIs (INR Crore)  

Overall Outstanding of the Borrower with MLI

(INR Crore)

Total Maximum Loan Amount allowed under the scheme (INR Crore) Total Maximum Loan Amount allowed without NOC for MLI

(INR Crore)

A B C= 20% of A D= 20% of B
Borrower A 20 15 4 3
Borrower B 5 2 1 0.4
Borrower C 25 25 5 0.5
Borrower D 15 10 3 2

9. Interest Rate of Credit under the Scheme

Interest Rate on GECL shall be capped as under:

  • For Banks and FIs, lending rate linked to one of the external benchmark rates prescribed by RBI +1% subject to a maximum of 9.25% per annum.
  • For NBFCs, the interest rate on GECL shall not exceed 14% per annum.
  • Since the additional pre-approved facility is to be provided to existing customers, no additional processing fee shall be charged by MLIs to borrowers.
  • No penal interest due to any non-compliance of the already accepted covenants on the existing credit facilities may be charged on additional loans during the sanction time.

10. Nature of account and Tenor of Credit under the Scheme

  • A separate loan account should be opened for the borrower, distinct from the existing loan account(s), for coverage under the Scheme.
  • The tenor of loans provided under GECL shall be for a tenor of four years from the date of disbursement. No pre-payment penalty shall, however, be charged by the MLIs in case of early repayment.
  • Moratorium period of one year on the principal amount shall be provided to borrowers for the GECL funding during which interest shall be payable
  • The principal shall be repaid in 36 installments after the moratorium period is over.
  • Pre-payment of facilities to be allowed at no additional charge to the borrower.
  • The account may be operated in combination with applicable Interest Subvention Scheme(s) as far as feasible
  • RBI’s approval has been solicited for keeping risk weight for loans provided under GECL at zero.

11. Security

  • The additional WCTL (in case of banks and FIs)/ Term loan (in case of NBFCs) facility granted under GECL shall rank pari passu with the existing credit facilities in terms of cash flows and security, with charge on the assets financed under the Scheme to be created within a period of three months from the date of disbursal.
  • No additional collateral shall be asked for additional funding under GECL.

12. Guarantee Fee

  • No Guarantee Fee shall be charged from the MLIs by NCGTC for the Credit facilities provided under the Scheme.

13. Extent of the Guarantee Coverage

  • The Trustee Company shall provide 100% Guarantee coverage on the outstanding amount for the credit facility provided under the Scheme as on the date of NPA.

14. Definition of Default

  • The definition of default for borrowers shall be as per the instructions and guidelines issued by the Reserve Bank of India from time to time under extant norms on income recognition, asset classification and provisioning.

15. Invocation of guarantee

  • The Member Lending Institutions (MLIs) are required to inform the date on which the account was classified as NPA within 90 days of the account being classified as NPA
  • The Trustee Company shall pay 75 per cent of the guaranteed amount within 30 days of preferring of eligible claim by the lending institution, subject to the claim being otherwise found in order and complete in all respects. The balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings or till the decree gets time barred, whichever is earlier.

16. Appropriation of amount realized by the lending institution in respect of a credit facility after the guarantee has been invoked

Post invocation of the guarantee claim, if any recoveries are made in the account, MLIs shall first adjust such recoveries towards the legal costs incurred by them for recovery of the amount and shall thereafter remit to NCGTC the balance recoveries.

17. Agreement to be executed by the lending institution

  • A lending institution shall not be entitled to a guarantee in respect of any eligible credit facility granted by it unless it has submitted an Undertaking with the Trustee Company in such form as may be required by the Trustee Company for covering by way of guarantee, under the Scheme all the eligible credit facilities granted by the lending institution, for which provision has been made in the Scheme.
  • All interested and eligible MLIs are required to submit the Undertaking to NCGTC for the purpose of this Scheme

18. Responsibilities of lending institution under the Scheme:

  • Lending Institutions shall provide certain data points on a fortnightly basis to Trustee Company to enable Trustee Company to track the outreach and impact of the Scheme. The indicative data points required shall be as follows o Number of eligible borrowers and the amount outstanding as on 29th February, 2020 (to be shown separately for Business Enterprises, MSME and PMMY borrowers)
    • Number of Business Enterprises, MSME and PMMY borrowers sanctioned GECL facility under the Scheme (to be shown separately for MSME and PMMY borrowers)
    • Number of Business Enterprises, MSME and PMMY borrowers disbursed GECL facility under the Scheme (to be shown separately for MSME and PMMY borrowers)
    • Total Amount of Funds sanctioned under the Scheme with break up across TL (in case of NBFCs) and WCTL (in case of banks and FIs), to be shown separately for Business Enterprises, MSME and PMMY borrowers
    • Total Amount of Funds disbursed under the Scheme with break up across TL (in case of NBFCs) and WCTL (in case of banks and FIs), to be shown separately for Business Enterprises, MSME and PMMY borrowers
    • Total Outstanding Amount for Term loans (in case of NBFCs) and for WCTL (in case of banks and FIs), to be shown separately for Business Enterprises, MSME and PMMY borrowers
    • Number of employees employed by the borrowers, to be shown separately for Business Enterprises, MSME and PMMY borrowers (to be provided at the time of sanction and then to be updated monthly)
    • Default ratio and NPA ratio (NCGTC may seek additional information from MLIs within extant regulation)
  • Should enable communication of the Scheme to the borrowers by highlighting the Scheme details on their website and linking to Scheme webpage.
  • As this is an opt out facility, Lending institution should work towards creating awareness for the Scheme by enabling communication of the Scheme through SMS and Email campaigns to all eligible borrowers.
  • Lending Institutions are expected to be liberal in sanctioning loans. They are, however, expected to evaluate credit proposals by using prudent banking judgement and use their business discretion / due diligence in selecting commercially viable proposals and conduct the account(s) of the borrowers with normal banking prudence.
  • The lending institution shall closely monitor the borrower account, and shall put in all required efforts to ensure that the account is serviced regularly.
  • The lending institution shall safeguard the primary securities in respect of the credit facility in good and enforceable condition.
  • The lending institution shall ensure that the guarantee claim in respect of the credit facility and borrower is lodged with the Trustee Company in the form and in the manner and within such time as may be specified by the Trustee Company in this behalf and that there are no delays on its part to notify the default in the borrowers account which shall result in the Trustee Company facing higher
    guarantee claims.
  • The payment of guarantee claim by the Trustee Company to the lending institution does not in any way take away the responsibility of the lending institution to recover the entire outstanding amount of the credit from the borrower. The lending institution shall exercise all the necessary precautions and maintain its recourse to the borrower for entire amount of credit facility owed by it and initiate all necessary actions for recovery of the outstanding amount, including such action as may be advised by the Trustee Company.
  • The lending institution shall comply with such directions as may be issued by the Trustee Company from time to time for facilitating recoveries in the guaranteed account, or safeguarding its interest as a guarantor, as the Trustee Company may deem fit and the lending institution shall be bound to comply with such directions.
  • The lending institution shall, in respect of any guaranteed account, exercise the same diligence in recovering the dues, and safeguarding the interest of the Trustee Company in all the ways open to it as it might have exercised in the normal course if no guarantee had been furnished by the Trustee Company. The lending institution shall, in particular, refrain from any act of omission or commission, either before or subsequent to invocation of guarantee, which may adversely affect the interest of the Trustee Company as the guarantor. In particular, the lending institution should intimate the Trustee Company while entering into any compromise or arrangement, which may have the effect of discharge or waiver of personal guarantee(s) or security.
  • The lending institution shall also ensure either through a stipulation in an agreement with the borrower or otherwise, that it shall not create any charge on the security held in the account covered by the guarantee for the benefit of any account not covered by the guarantee, with itself or in favour of any other creditor(s) without intimating the Trustee Company. Further the lending institution shall secure for the Trustee Company or its appointed agency, through a stipulation in an agreement with the borrower or otherwise, the right to list the defaulted borrowers’ names and particulars on the Website of the Trustee Company.

19. Modifications in the Scheme

Any changes to the current structure of the Scheme, including but not limited to the eligibility criteria, guarantee fee, rate of interest and tenor of GECL under the Scheme, shall be decided by the Management Committee for the ECLGS Fund.

https://www.ncgtc.in/sites/default/files/faqsoneclgs.pdf

https://www.ncgtc.in/sites/default/files/eclgs_-_undertaking-mlis.doc

5. Frequently Asked Questions (FAQ) on Guaranteed Emergency Credit Line of Rs. 3 lakh crore

Q 1. What is Guaranteed Emergency Credit Line (GECL)?

Ans. The GECL is a loan for which 100% guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs), and which will be extended in the form of additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs), to eligible MSMEs/ Business Enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers. Credit under GECL would be up to 20% of the borrower’s total outstanding credit up to Rs. 25 crore, excluding off-balance sheet and non-fund based exposures , as on 29th February, 2020, i.e., additional credit shall be up to Rs. 5 crore.

Q 2. What is the objective of the Scheme? 

Ans. The Scheme is a specific response to the unprecedented situation COVID-19. It seeks to provide much needed relief to the MSME sector by incentivizing MLIs to provide additional credit of up to Rs. 3 lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.

Q 3. What is the Emergency Credit Line Guarantee Scheme?

Ans. The Emergency Credit Line Guarantee Scheme provides 100% guarantee coverage by NCGTC to MLIs on GECL of up to Rs. 3 lakh crore to eligible MSMEs. MSMEs for the purpose of this Scheme will include MSMEs/ Business Enterprises which are constituted as Proprietorships, Partnerships, Registered Companies, Trusts and Limited Liability Partnerships (LLPs), and also interested borrowers under PMMY.

Q 4. Who are the MLIs under the Scheme?

Ans. All SCBs are eligible as MLIs. NBFCs which have been in operation for at least 2 years as on 29.2.2020, and FIs will also be eligible as MLIs under the Scheme.

Q 5. What will be the definition of FIs for the purpose of this Scheme?

Ans.  FIs for the purpose of this Scheme will be as defined under sub-clause (i) of clause (c) of Section 45-I of RBI Act.

Q 6. What is the duration of the Scheme? 

Ans. The Scheme would be applicable to all loans sanctioned under GECL during the period from May 23, 2020 to 31st October, 2020, or till an amount of Rs. 3 lakh crore is sanctioned under GECL, whichever is earlier.

Q 7. What would be the guarantee coverage under the Scheme?

Ans. The entire funding provided under GECL shall be provided with a 100% credit guarantee coverage by NCGTC under the Scheme.

Q 8. What will be the eligibility criteria for MSMEs to avail the benefit of the Scheme?

Ans. The eligibility criteria under the Scheme are as under:

  • All MSME borrower accounts with combined outstanding loans across all MLIs of up to Rs. 25 crore as on 29.2.2020, and annual turnover of up to Rs. 100 crore in FY 2019-20. In case accounts for FY 2019-20 are yet to be audited/finalized, the MLI may rely upon the borrower’s declaration of turnover.
  • The Scheme is valid only for existing customers on the books of the MLI.
  • Borrower accounts should be classified as regular, SMA-0 or SMA-1 as on 29.2.2020. Accounts classified as NPA or SMA-2 as on 29.2.2020 will not be eligible under the Scheme.
  • The MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to MSMEs that are not required to obtain GST registration.
  • Loans provided in individual capacity will not be covered under the Scheme.

Q 9. Will the Scheme also cover borrowers under PMMY?

Ans. Yes, loans under PMMY extended on or before 29.2.2020, and reported on the MUDRA portal shall be covered under the Scheme.

Q 10. Will GECL be extended as a separate loan account, or as part of the existing loan account of the borrower?

Ans. A separate loan account shall be opened for the borrower for extending additional credit under GECL. This account will be distinct from the existing loan account(s) of the borrower.

Q 11. Will loans under the Scheme be automatically given without any application or solicitation from the borrower?

Ans. This is a pre-approved loan. An offer will go out from the MLI to the eligible borrowers for a pre-approved loan which the borrower may choose to accept. If the MSME accepts the offer, it will be required to complete requisite documentation. Thus, an ‘opt-out’ option will be provided to eligible borrowers under the Scheme, i.e., if the borrower is not interested in availing the loan, he/she may indicate accordingly.

Q 12. What would be the procedure followed in case a borrower has loan accounts with multiple lenders?

Ans.

  • In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or each of the current lenders in proportion depending upon the agreement between the borrower and the MLI.
  • In case the borrower wishes to take from any lender an amount more than the proportional 20% of the outstanding credit that the borrower has with that particular lender, a No Objection Certificate (NOC) would be required from all other lenders.
  • No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20% of the outstanding credit that the borrower has with that lender.

Q 13. To avail GECL, will it be necessary for existing loans of the borrower to be covered under existing guarantee schemes such as CGFMU or CGTMSE?

Ans.  No.

Q 14. Will the interest rate on GECL be capped?

Ans.  Yes, interest rates on GECL shall be capped as under:

  • For Banks and FIs, one of the RBI prescribed external benchmark linked rates +1% subject to a maximum of 9.25% per annum
  • For NBFCs, the interest rate on GECL shall not exceed 14% per annum

The Scheme may also be operated in combination with applicable interest subvention schemes, as far as feasible.

Q 15. What would be the tenor of loans provided under GECL?

Ans.  The tenor of loans provided under GECL shall be four years from the date of disbursement. No pre-payment penalty shall, however, be charged by the MLIs in case of early repayment.

Q 16. Is there any moratorium period prescribed under the Scheme?

Ans. Yes, a moratorium period of one year on the principal amount shall be provided for GECL funding. Interest shall, however, be payable during the moratorium period. The principal shall be repaid in 36 instalments after the moratorium period is over.

Q 17. Is any turnaround time prescribed for MLIs under the Scheme for sanction of GECL?

Ans. Indicative turnaround time for loans under the Scheme shall be the same as those prescribed by Department of Financial Services for credit support in the context of COVID-19 pandemic.

Q 18. Will any guarantee fee be charged under the Scheme by NCGTC?

Ans. No, NCGTC will not charge any guarantee fee under the Scheme.

Q 19. Will any processing fee be charged by MLIs for sanction of loans under GECL?

Ans. Since additional credit under GECL is to be provided to existing customers, no additional processing fee shall be charged by lenders.

Q 20. Will MLIs ask for any additional collateral for the GECL facility?

Ans. No additional collateral shall be asked by MLIs for additional credit extended under GECL.

Q 21. Will the categorization of existing loans extended through current Government schemes such as PMEGP or PMMY change if GECL is provided to such borrowers?

Ans. No. Existing loans extended through current Government schemes would continue to be categorized under that scheme as earlier. GECL under this Scheme shall be over and above the existing loan.

Q 22. What will be the risk weight assigned to the credit extended under GECL?

Ans.  Approval of RBI has been requested for assigning zero risk weight to the credit extended under GECL.

Q 23. What will be the security on credit extended under GECL? Scheme?

Ans.  The credit under GECL will rank pari passu with the existing credit facilities in terms of cash flows (including repayments) and securities, with charge on the assets financed under the Scheme to be created within a period of 3 months from the date of disbursal.

Q 24. Will MLIs be required to enter into any agreement with NCGTC for the purpose of this Scheme?

Ans. Yes, MLIs will be required to submit an Undertaking to NCGTC for the purpose of this Scheme.

Q 25. How will the guaranteed amount be paid by NCGTC to the MLIs on invocation of the guarantee?

Ans. 75% of the guaranteed amount will be paid by NCGTC within 30 days of an eligible claim being preferred by the MLI concerned. The balance 25% will be paid on conclusion of recovery proceedings or till the decree gets time barred, whichever is earlier.

Q 26. Who will issue detailed operational guidelines for ECLGS, and who will have the authority to modify provisions of the Scheme/operational guidelines?

Ans.  NCGTC has issued the detailed operational guidelines for the Scheme. The Management Committee for ECLGS fund will have the authority to approve any changes to the current structure of the Scheme/ operational guidelines.

Q 27. I run a business enterprise and have a GST registration. However, I am not registered as an MSME nor do I have Udyog Aadhar. My Bank also does not classify me as an MSME borrower. Am I eligbile under the scheme?

Ans.  You are eligible if

(i) you have total credit outstanding of Rs. 25 Crore or less as on 29th Feb 2020

(ii) your turnover for 2019-20 was upto Rs. 100 Cr.

(iii) You have a GST registration or were not required to obtain such GST registration Udyog Aadhar or recognition as MSME is not required under this Scheme

Q 28. My Bank/ NBFC has offered me a pre approved loan of 15% only though the scheme mentions 20%. Can the Bank/ NBFC do so?

Ans. Under ECLGS, Banks/ NBFCs are to offer loans upto 20%. Actual loan extended can therefore be less than 20%. While the Bank/ NBFC is expected to be liberal in sanctioning such loans, it is also expected to evaluate credit proposals by using prudent banking judgement and use business discretion / due diligence in selecting commercially viable proposals and conduct the account(s) of the borrowers with normal banking prudence

Q 29. I run a retail shop. Am I eligible for coverage?

Ans.  See answer to question 28

Q 30. I operate a lending business. Am I eligible?

Ans. No please. Typically lending institutions get funds from banks/ NBFCs through onlending, refinance, asset purchase, securitization, assignment etc. There are therefore other windows available including the Partial Credit Guarantee Scheme and the Special Liquidity Facility.

Q 31. Are all NBFCs eligible to become MLIs with NCGTC?

Ans. No. The NBFC must be registered with RBI, should be meeting the CRAR requirements prescribed by RBI and have been in lending business for at least two years as on 29th Feb 2020.

The Managing Committee of the Scheme may prescribe additional qualification criteria from time to time.

Q 32. What will be the procedure for claim settlement ?

Ans.  This will be advised in due course through additional guidelines to be issued.

Q 33. Can new MSME borrowers get covered under the scheme?

Ans.  ECLGS scheme is only for existing borrowers on the books of the banks as on 29th Feb 2020. Any New borrowers should be covered under ongoing CGTMSE and NCGTC schemes

Q 34. Can co-applicant loans between entity and the promoter or director get covered under the scheme ?

Ans.  For loans having co-applicant, only those existing loans where entity is the primary co-applicant are covered under the Scheme for additional emergency funding

Q 35. Are off balance sheet loans provided to MSME borrowers covered as part of the scheme?

Ans. No, the scheme does not cover the off-balance sheet exposure. Only on balance sheet exposures outstanding as on 29th Feb, 2020 are eligible to be covered under the scheme

Q 36. Who can provide answers to any further queries?

Ans. Please address your queries/suggestions to ceo@ncgtc.in

—————————-

6. Draft Format of of undertaking to be executed by lending institution

xxxxx

Annexure II 

{Draft of undertaking to be executed by lending institution}

To

The Chief Executive Officer,
National Credit Guarantee Trustee Company,
SME Development Centre, 2nd floor,
Plot No.C-11, ‘G’ Block
Bandra Kurla Complex, Bandra (East)
Mumbai-400051

Dear Sir,

In consideration of the National Credit Guarantee Trustee Company (hereinafter referred to as “the Company” which expression shall, unless repugnant to the context, also include its successors and assigns), agreeing to guarantee under the Emergency Credit Line Guarantee Scheme (a copy of the scheme guidelines is hereto annexed and which is hereinafter referred to as “the Scheme”), certain credit facilities granted by us to eligible borrowers,  we ______________________________________ (Name of lending institution), do hereby agree with the Company as follows :

1. That the provisions of this Undertaking shall be in addition to, and not in derogation of, the provisions of the Scheme and the guidelines and instructions issued by the Company from time to time.

2. That the provisions of the Scheme and such modifications as may be made thereto from time to time shall be deemed to be incorporated in this Undertaking and shall be binding on us, in so far they relate to the credit facilities granted by us to borrowers which have been or are eligible for being guaranteed thereunder.

3. That the provisions of the Scheme and this Undertaking shall be applicable to or in relation to all credit facilities eligible for guarantee under the Scheme.

4. That we shall claim the benefit of the guarantee under the Scheme only in respect of the credit facilities specified in the Scheme and to the extent provided therein and that we shall for this purpose obtain and preserve affidavits or other documents from the borrowers concerned that the borrowers in respect of whom the benefit of the guarantee has been or is to be provided by the Company are eligible for the guarantee under the Scheme. If found otherwise, at any stage, the Company shall be at liberty to take such action as it may deem fit.

5. That the additional credit facilities being covered under this scheme shall rank pari passu with the existing credit facilities in terms of cash flows and security, with charge on the assets financed under the Scheme to be created within a period of three months from the date of disbursal. No additional collateral shall be asked for the credit facility specified in the scheme.

6. That we agree that a borrower who ceases to be so eligible will, in accordance with and subject to the provisions of the Scheme, be excluded from the benefit of any guarantee and that for this purpose, we shall obtain from the borrower concerned every quarter or at such other intervals as may be required by the Company, such information declarations as may be deemed necessary.

7. That the books of accounts, ledgers and other documents relating to eligible credit facilities covered by the Scheme shall, as far as may be practicable, be segregated and maintained in a proper manner so as to facilitate such scrutiny or inspection as may be undertaken by the Government of India (GOI) or by the Company or by any other person nominated by the Company in this behalf.

8. That we undertake to make available to the Officers of GoI, Company or any agency which may be specified by the Company in this behalf, as the case may be, all our books and records and provide such other facilities as may be required for such scrutiny and inspection.

9. That we shall furnish to the Company a statement in a form and manner required by the Company, showing the outstanding balances with break-up of principal and interest / other expenses details in respect of the eligible credit facilities covered under the Scheme, as and when required by the Company.

10. That we shall furnish to the Company thereafter such statements or information as the Company may require about the eligible credit facilities covered under the Scheme in such form and manner, and at such intervals, as may be required by the Company.

11. That in order to enable the Company to ascertain whether a claim made on it is on account of any eligible credit facility which has been so covered, we shall preserve in good order the detailed statement or statements referred to in clauses 7, 8 and 9 hereof as also the relevant documents relating to the said credit facility.

12. That we shall, in respect of every eligible credit facility covered under the Scheme, exercise due diligence in recovering the dues, and safeguarding the interest of the Company. We shall, in particular, refrain from any act of omission or commission either prior to or subsequent to invocation of guarantee, which may adversely affect the interest of the Company / Trust as the guarantor.

13. That for invoking the guarantee under the Scheme, we undertake to submit to the Company an application in such form as may be specified by the said Company and furnish such other information as may be required of us by the Company.

14. That we shall secure for the Company or its appointed agency the right to list the defaulted borrowers names and particulars on the web site by the Company.

15. That we give consent to furnish information to various Credit Information Bureaus/ other institutions that the Company may demand from time to time with regard to the eligible credit facilities covered under the Scheme.

16. That notwithstanding anything to the contrary contained in the Scheme, if any loss occurs in respect of an account covered by the Scheme owing to actions / decisions taken contrary to or in contravention of the guidelines issued by the Company, we shall not make and shall not also be entitled to any claim on the Company in respect of the said account and the Company may take such action, as it may deem fit.

17. That all applications, documents, receipts, statements and other papers shall be signed on behalf of our institution by the Chief Executive Officer or by other persons in our employment who shall be deemed to be authorised by us to sign all such applications, documents, receipts, statements and other papers and that any irregularity in the signature, or want of authority of the persons so signing shall not in any way affect or prejudice the rights of the Company or affect our liability in respect thereof.

18. That we certify that the information as provided in Appendix I of this Undertaking (attached) is proper and correct and we undertake to provide information as required in Appendix II of this Undertaking (format attached) on the 1st and 15th of each month from the date of availment of benefits under the scheme till the close of the scheme

19.That all data, including applications, periodical returns, funds transfer, updated or transferred to the Company in the electronic form, shall be deemed to be signed on behalf of our institution by the Chief Executive Officer or by other persons in our employment who shall be deemed to be authorised by us to sign all such applications, documents, receipts, statements and other papers and that any irregularity in the use of member-id, or want of authority of the persons so signing shall not in any way affect or prejudice the rights  of the Company or affect our liability in respect thereof.

20. That we shall introduce and follow such accounting arrangements as may be necessary or as may be required by the Company or take such other steps as may be necessary or expedient for protecting its interests in respect of the outstanding balances on account of credit facilities in regard to which the Company’s guarantee is invoked by us.

21. That this Undertaking shall take effect from the date of signature.

22. That the stamp duty payable on this Undertaking shall be borne by us.

Yours faithfully,

For and on behalf of _____________________

Signature _____________________________

Name _______________________________­

Designation ___________________________

Place :_______________________

Date : _______________________

Note :

(i) This Undertaking is to be executed by the lending institution for getting itself registered as Member Lending Institution (MLI) to avail of the guarantee facility extended by the Company.

(ii) This Undertaking is to be executed by an official authorised by appropriate authority of the lending institution.

(iii) This Undertaking is to be stamped as an agreement. The liability to stamp duty will depend upon the place where it is executed and/ or acted upon.

(iv) Kindly enclose resolution from your Board of Directors, approving enrolment as member of National Credit Guarantee Trustee Company.

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22 Comments

  1. Chetan Shah says:

    I think the additional facility is guaranteed by govt so it has a “Second Charge” and not pari passu as mentioned in point 11:
    “That the additional credit facilities being covered under this scheme shall rank pari passu with the existing credit facilities…..”

  2. Prathiba chopra says:

    e are MSME manufacturer of plastic products .we having Term Loan from NBFC. On may our total outstanding for the term loan was 14 to 20 EMI as we have taken the financed for 5 machines .Well we have also taken the moratorium March and April 2020.In May 2020 same assets have been refinanced by NBFC as we have faced the financial crises. Now my query is that can we get the fund under the ECLGS (“Scheme) .

  3. Ankit Gambhir says:

    Provision to the bank for the calculation of the interest rate on the loan are also applicable to the NBFC.
    Minimum rate of interest at which NBFC can lend.

  4. Ankit Gambhir says:

    Is the provision applicable to the bank for calculating the interest rate on the loan also apply to the NBFC.
    Kindly tell the minimum rate on which NBFC can lend.

  5. Goutam Bandyopadhyay says:

    In case of takeover of loans in the month of March 2020 by some other bank, what is going to be the status of availing ECLGS.
    The old banking is saying as on the date of declaring the scheme the company is not having business relation & new bank is saying on the date of cut off 29/02/2020 the company was not banking with them and o/s balance Nil.

  6. Shreepal says:

    For ECLGS laon do we need to do Registration and for the same will Charges be applied for Stamp duty and Registration. If Yes how much and if No, can you share any notification…

  7. Vimal Solanki says:

    Are any kind of processing charges/stamp duty levied for this scheme. If yes can anyone please provide the breakup..??

  8. SANJAY KULKARNI says:

    Our Company’s CIBIL outstanding balance report as on 29 Feb 2020 shows incorrect figure and hence we are deprived of from getting the benefits of the ECLGS scheme, how we can correct CIBIL report on urgent basis ? No quick response from CIBIL in this regards
    To whom we should complaint in this regards

  9. Suresh Kewalramani says:

    We have been banking with Saraswat Coop Bank Ltd a scheduled commercial bank for last 40 years
    We approached the bank for assistance under the ECLGS scheme
    We have been told by the bank that Cooperative banks are not authorised to sanction assistance under this scheme
    Can we approach any nationalised bank for this assistance and are they oblieged to give the money

  10. Krishna s.Hogade says:

    Co-oparetive banks आपत्कालीन क्रेडिट लोन साठी पात्र आहेत का?

  11. R T says:

    What happens if the partners/guarantors are changed post 29th Feb and the Bank has concluded the renewal with the new partners and guarantors? Also, in some cases the renewals are processed releasing some collateral post 29th Feb’20?

    Can the Bank lend in this scenario?

  12. KVGRao says:

    The threshold limit of turnover has been raise from Rs.100 crores to Rs.250 crores for medium enterprises. Whether this is amendment is applicable for ECLGS.

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