moratorium: ECLGS 2.0: borrowers must repay principal in 48 installments after one year of moratorium

Borrowers receiving loans under the Emergency Line of Credit Guarantee (ECLGS) 2.0 program will be required to repay the principal amount in 48 installments after the one-year moratorium, according to the operational guidelines for the new program released Thursday.

The government has characterized the credit product under which the guarantee would be given as a secured emergency line of credit (GECL), in published guidelines with a set of 127 frequently asked questions (FAQs).

Finance Minister Nirmala Sitharaman announced version 2.0 of the program while extending the existing program until March 31, 2021, when the Atmanirbhar Bharat 3.0 package was unveiled earlier this month.

The two credit guarantee programs would operate side by side and would both be subject to the Rs 3 lakh crore limit that was announced in the original program in May.

As of November 12, loans worth Rs 2.05 lakh crore were sanctioned under ECGLS, with the disbursement of Rs 1.52 lakh crore. The second scheme was being considered to use the remaining funds. as part of the overall amount.

While ECLGS 1.0 was initially aimed at supporting micro, small and medium enterprises (MSMEs) with a total outstanding credit of up to Rs 50 crore as of February 29, this year ECLGS 2.0 will focus on large entities with an outstanding total credit ranging from Rs 50 crore to Rs 500 crore, as on date specified.

In addition to ECLGS 2.0, for which no annual turnover limit was prescribed, it was also decided to extend ECLGS 1.0 to program entities that had a total outstanding credit of up to Rs.50 crore, but who were previously ineligible due to their annual turnover. exceeding Rs. 250 crore, according to a statement from the Ministry of Finance.

The last program was intended to support businesses in the 26 troubled sectors identified by the Kamath Committee on the Resolution Framework and the Health Sector. These include aviation, logistics, hospitality, tourism and real estate.

However, “ECLGS is eligible for all business activities. There is no negative list for coverage under ECGLS, ”says the FAQ.

Both regimes provide for a 100% credit guarantee up to 20% of outstanding loans at the end of February. However, accounts overdue more than 60 days from the specified date (SMA-2 and above) are not eligible for ECLGS 1.0, while accounts overdue by more than 30 days (SMA-1 and above) are not eligible for ECLGS 2.0.

Likewise, the duration of loans under the first scheme was capped at four years while that of the second was five years. Beyond the one-year moratorium on principal repayments, borrowers under ECLGS 1.0 must replay the amount in 36 installments against 48 for ECLGS 2.0. Interest payments would also continue during the moratorium period, in accordance with the guidelines.

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