The government recently tweaked the Emergency Credit Line Guarantee Scheme (ECLGS) and put out an FAQ explaining the changes.
Under the new guidelines, banks will provide 100 percent government guaranteed funding to borrowers in 26 sectors identified by the KV Kamath Panel. The credit product for which a guarantee will be provided will be called Guaranteed Emergency Credit Line (GECL).
The government launched ECLGS under the Rs 20 lakh crore Covid-19 economic relief package. The Kamath panel was set up to identify the stressed sectors that needed assistance in terms of one-time loan restructuring.
Under GECL, borrowers can get credit up to 20 percent of the their total credit outstanding as on February 29, 2020. GECL can be provided as fund based or non-fund based or a mix of two, the government said. Fund-based means direct cash support while non-fund based could be in the form of guarantees or other instruments.
GECL in respect of borrowers with credit outstanding above Rs 50 crore and not exceeding Rs 500 crore is restricted to 26 sectors identified by Kamath Committee in its report of September 4, 2020 and the Healthcare sector.
The scheme will be applicable to all loans sanctioned under GECL during May 23, 2020 to March 31, 2021 or till guarantees for an amount of Rs 3 lakh crore are issued byNCGTC, whichever is earlier, the government said.
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 bank.
In case a borrower wishes to take from a specific lender an amount more than the 20 percent of the outstanding credit they have with that particular lender, a No Objection Certificate (NOC) would be required from the lender whose share of loan under ECLGS is being proposed to be taken. However, it would be necessary for the lender to agree to provide loan under ECLGS, the government said in the FAQ.
“No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20 percent of the outstanding credit that the borrower has with that lender,” the government said.
The tenor of loans provided under GECL will be four years from the date of first disbursement to of borrowers under ECLGS 1.0, the government said. The tenor of fund-based facility under ECLGS 2.0 shall be five years from the date of first disbursement/first utilisation under fund-based or non-fund based facility.
No tenor has been prescribed for non-fund based facility but the guarantee cover on the non-fund based facility shall expire at the end of five years from the date of first disbursement/first utilisation under the fund-based or non-fund based facility, the government said.
“It may be noted that first tranche of non-fund based facility should be utilised on or before June 30, 2021. No pre-payment penalty shall, however, be charged by the MLIs in case of early repayment,” the government said.