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ECLGS: All You Need To Know About Govt's 100% Collateral Free MSME Loan Scheme


The Finance Ministry on Wednesday said that loans worth Rs 10,361.75 crore under the Emergency Credit Line Guarantee Scheme (ECLGS) have already been sanctioned by public sector banks.

As part of the COVID-19 relief, the government, in May, had announced the 100% collateral-free loans of up to Rs 3 lakh crore with a 100% guarantee for severely impacted MSMEs (Micro, Small and Medium Enterprises), which is being provided by the National Credit Guarantee Trustee Company (NCGTC) through banks, NBFCs (non-banking finance companies) and Financial Institutions.

The 100% guarantee is provided by NCGTC to banks and NBFCs so that they can extend credit to businesses and MSMEs to meet their additional term loan/additional working capital requirements.

ECLGS: All You Need To Know About Govt's 100% Collateral Free MSME Loan Scheme

Here are details on the scheme based on FAQs on NCGTC's website for ECLGS:


Amount extended as credit under ECLGS to a business/MSME will be up to 20 percent of total outstanding as on 29 February 2020. Actual loan extended can therefore be less than 20 percent, depending on terms agreed between the borrower and lender.


100% guarantee cover will be provided for additional funds sanctioned under the ECLGS.


  • Business enterprises or MSMEs with outstanding loan of up to Rs 25 crore as on 29 February 2020 and turnover of up to Rs 100 crore in FY 2019-20 are eligible.
  • Also, they need to have a GST registration unless the business is not required to obtain such GST registration Udyog Aadhar or recognition as MSME is not required under this Scheme.
  • Proprietorship, partnership, registered company, trusts and Limited Liability Partnerships (LLPs) are all eligible
  • The scheme is valid for pre-existing customers of the bank/NBFC and not new borrowers.
  • The loan account should be less than or equal to 60 days past due as on 29 February 2020 and the borrower has not been classified as SMA 2 or NPA by any of the lenders as on 29 February 2020.
  • Loans under Pradhan Mantri MUDRA Yojana extended on or before 29 February and reported on the MUDRA portal shall also be covered under the Scheme.
  • 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.
  • Loan should be taken for the business and not for the personal use of the promoter/director.

Interest rate

It is capped at 9.25 percent for banks and 14 percent for NBFCs.



Maximum of 4 years from the date of disbursement of the amount. No pre-payment penalty shall, however, be charged by the lender in case of early repayment.

Moratorium offered

Moratorium period on the principal amount is 12 months.

Duration of the Scheme

The scheme is applicable on loans sanctioned between 23 May and 31 October 2020 or till an amount of Rs 3 lakh crore is sanctioned, whichever is earlier.

How to apply?

Loan under ECLGS is a pre-approved loan. An offer will go out from the bank/NBFC to the eligible borrowers for a preapproved 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.

Read more about: msme loan business
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