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Consider the following statements regarding the Emergency Credit Line Guarantee Scheme (ECLGS):
  1. It provides 100 percent guaranteed coverage to the banks to extend emergency credit to business entities.
  2. The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides guarantees to the loans provided under ECLGS.
Which of the statements given above is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding the Emergency Credit Line ...
Emergency Credit Line Guarantee Scheme (ECLGS) is a scheme introduced by the Government of India to provide financial support to business entities affected by the COVID-19 pandemic. The scheme aims to provide emergency credit to help businesses meet their operational expenses and maintain their workforce. Let's analyze the given statements regarding the scheme:

1. It provides 100 percent guaranteed coverage to the banks to extend emergency credit to business entities.

This statement is correct. Under the ECLGS, the government provides a 100 percent guarantee coverage to banks and financial institutions for extending credit to eligible businesses. The guarantee coverage ensures that the banks do not bear the risk of default, and hence, they are more willing to provide credit to the businesses.

2. The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides guarantees to the loans provided under ECLGS.

This statement is incorrect. The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India (RBI) that provides deposit insurance to bank depositors. It does not provide guarantees to loans provided under the ECLGS. The guarantee under ECLGS is provided by the National Credit Guarantee Trustee Company Limited (NCGTC), which is a subsidiary of the SIDBI (Small Industries Development Bank of India).

In conclusion, only statement 1 is correct. The ECLGS provides 100 percent guaranteed coverage to the banks to extend emergency credit to business entities. The guarantee is provided by the NCGTC, and not by the DICGC.
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