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Emergency Credit Line Guarantee Scheme (ECLGS)

Context: Emergency Credit Line Guarantee Scheme (ECLGS) expanded.

Details

• The government has extended the ECLGS on account of the disruptions caused due to the second wave of the pandemic.
• ECLGS 4.0: 100% guarantee cover to loans up to Rs.2 crore to hospitals/nursing homes/clinics/medical colleges for setting up on-site oxygen generation plants, interest rate capped at 7.5%.
• The government also announced the extension of the tenor of the scheme for MSMEs and other entities that are eligible for restructuring as per the Reserve Bank of India (RBI) guidelines as of May 5, 2021, and had borrowed credit under ECLGS 1.0.
  • From overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months under ECLGS 1.0 will now be able to avail for a tenor of five years for their ECLGS loan, that is, repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter.
• Moreover, additional ECLGS assistance of up to 10 per cent of the outstanding credit as of February 29, 2020, has been offered to borrowers covered under ECLGS 1.0.
• The current ceiling of Rs. 500 Cr. of loan outstanding for eligibility under ECLGS 3.0 to be removed, subject to maximum additional ECLGS assistance to each borrower being limited to 40% or Rs.200 crore, whichever is lower.
• The Ministry also extended the scope of ECLGS 3.0 to cover the Civil Aviation sector.
• Validity of ECLGS extended to 30.09.2021 or till guarantees for an amount of Rs.3 lakh crore is issued. Disbursement under the scheme permitted up to 31.12.2021.

Emergency Credit Line Guarantee Scheme (ECLGS)
The Union Cabinet, led by Prime Minister Narendra Modi, approved the Emergency Credit Line Guarantee Scheme (ECLGS). The scheme was launched as a part of the Atma Nirbhar Bharat package for the Micro, Small, and Medium Enterprises (MSME) borrowers to mitigate the distress caused by the COVID-19 pandemic.
Emergency Credit Line Guarantee Scheme – Key Points

The Union Cabinet approved the Emergency Credit Line Guarantee Scheme in May 2020 and allowed additional funding of up to Rs.3 lakh crores to different sectors, especially Micro, Small, and Medium Enterprises (MSME) and MUDRA borrowers.

The scheme is a part of the AtmaNirbhar Bharat Abhiyan which was launched by Prime Minister Narendra Modi to make India a self-dependent country.

Under the ECLGS, all loans sanctioned under the Guaranteed Emergency Credit Line (GECL) facility will be provided with additional credit. However, there are two specifications:

• The scheme would be applicable for loans sanctioned from the date of announcement of the scheme to October 31, 2020, [Now September 3, 2021] OR
• Guarantees for an amount of Rs.3 lakh crore are issued (whichever happens first)
• Disbursement is permitted up to December 31, 2021.

Objectives of Emergency Credit Line Guarantee Scheme (ECLGS)
While the country was fighting the COVID-19 pandemic, major losses were faced by the MSMEs in the manufacturing and other sectors. To overcome this loss, the Government introduced the Emergency Credit Line Guarantee Scheme.
Discussed below are the major objectives of ECLGS

• As per this scheme, 100% guarantee coverage is to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) to the Member Lending Institutions (MLI), Banks, Financial Institutions, and Non-Banking Financial Companies (NBFC)
• It would increase access to, and enable the availability of additional funding facilities to MSME and MUDRA borrowers
• The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line
• It shall also provide credit to the sector at a low cost, thereby enabling the small sector businesses to meet their operational liabilities and restart their manufacturing and work

Once the proper functioning of the MSMEs in India starts off normally, it will benefit India economically and socially. This is one of the major reasons why the Government introduced this scheme during the unprecedented situation of a pandemic.
Who is eligible under the ECLG Scheme?

As per the latest eligibility criteria with the launch of the expanded Emergency Credit Line Guarantee Scheme, the following criteria had to be met to be applicable for a loan under the scheme:

• Enterprises with a turnover of up to Rs. 250 crores (FY 2019-20) with outstanding loans up to Rs. 50 crores, as of February 29, 2020
• GECL credit provided will be up to 20% of the borrower’s total outstanding credit as of February 29, 2020. 
• The maximum amount of loan that can be availed under the scheme is Rs. 5 crore

Tenure & Interest Rates under ECLGS

• The loan tenure is for 4 years and the moratorium period of 1 year on the principal amount is also applicable [Now the loan tenure is 5 years]
• Interest rates under ECLGS have also been capped:
  • 9.25% for Banks and Financial Institutions
  • 14% for Non-Banking Financial Companies
• The National Credit Guarantee Trustee Company Ltd (NCGTC) is not allowed to charge any Guarantee Fee from the Member Lending Institutions that are included under this scheme

ECLGS 4.0 – Expansion of the Scheme

On 31st May 2021, the Indian government notified the expansion of the ECLGS.
Under the version of ECLGS 4.0

• 100 percent guarantee cover is being provided to hospitals/nursing homes/clinics/medical colleges for loans of up to Rs 2 crores at an interest rate of 7.5 percent. It is given for setting up on-site oxygen generation plants.
• The eligible borrowers who earlier had a loan tenure of four years can now avail of a loan tenure of five years.
• Additional ECLGS assistance of up to 10% of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0
• The Rs. 500 crore loan ceiling under ECLGS 3.0 is being discontinued.
• The maximum additional ECLGS assistance to each borrower is being limited to 40% or Rs.200 crore, whichever is lower.
• Civil aviation sector is an eligible borrower under ECLGS 3.0.

About ECLGS 2.0

The scheme was announced in November 2020 as a part of the Atma Nirbhar Bharat 3.0 package. This is the revised scheme where the credit limits have been increased and the sectors involved have also been expanded.

Some key points that need to be noted with respect to ECLGS 2.0 have been discussed below:

• The Emergency Credit Line Guarantee Scheme has been expanded to 27 new sectors, including the health sector
• These 27 sectors have been identified by the Kamath Committee for one time debt restructuring. Power, construction, textiles, real estate, tourism are few among the many sectors identified
• Individual beneficiaries for both, professional and self-employed people have also been included in the scheme
• The credit limit has been revised to Rs.250 crores with outstanding loans up to Rs. 50 crore, as of February 29, 2020
• There also has been an expansion in the limit of loan which can be sanctioned. The maximum amount which can be availed under ECLGS 2.0 is Rs. 10 crore
• The tenor has been upgraded to 5 years with a 1-year moratorium on repayment of principal

About National Credit Guarantee Trustee Company Limited

• NCGTC or the National Credit Guarantee Trustee Company Limited was registered under the Companies Act, 1956 in 2014
• It is a wholly-owned company of the Government of India
• It was established by the Department of Financial Services, Ministry of Finance
• The main role of the Organisation is to design credit guarantee programs, to share the risk of lending among the lenders, and facilitate financial access to a prospective borrower

Conclusively, to revise the economy of the country which faced major disturbances due to the COVID lockdown, the Government of India decided to take charge of making the country self-dependent. And, the Emergency Credit Line Guarantee Scheme is one of those initiatives.

Statehood Day of Goa

Context: PM greeted the people of Goa on their Statehood Day.
Goa was Declared A State - [May 30, 1987] This Day in History
After a brief period military rule, on 8 June 1962, military rule was replaced by civilian government when the Lieutenant Governor Kunhiraman Palat Candeth nominated an informal Consultative Council of 29 nominated members to assist him in the administration of the territory. Dayanand Bandodkar was elected as the first Chief Minister of Goa, Daman and Diu.  Goa became India’s 25th state on 30th May 1987.
Background of the Statehood of Goa

In today’s edition of This Day in History, you can read about the formation of India’s 25th state – Goa. The liberation of Goa by the Indian Army, the referendum in Goa, and the factors leading to the state’s formation are all important events in India’s modern history. Hence, this is a must-know topic for the IAS exam.

• After India achieved independence from the British in 1947, Goa, which was a Portuguese colony, remained a colony until 1961.
• In 1961, the Indian Army, as per the wishes of most of the Goan population liberated it from Portuguese rule by force. Read more about the Indian army’s liberation of Goa.
• The Portuguese government in Goa surrendered formally on 19th December 1961 ending more than 450 years of colonial rule in the state of Goa.
• At that time, the then Prime Minister of India Jawaharlal Nehru promised the people of Goa that the distinct identity of the state would be retained.
• That was also about the time that many new states in India were formed along linguistic lines.
• Initially, Goa was made a Union Territory within the Indian union.
• On 16 January 1967, a referendum was held in Goa called the Goa Opinion Poll. Even though it was called a poll, it was a referendum and the results were binding on the government.
• The referendum was for the people to decide whether Goa would merge with the neighbouring state of Maharashtra or it would remain as a UT.
• It is notable because it was and till date is the only referendum to be held in independent India.
• The people voted against the merger and remained a UT. It was only in 1987 that Goa was declared a full-fledged state in the Indian Union.
• In 1963, Nehru had declared that Goa would remain a UT for ten years and then the future would be decided based on the wishes of the Goan people.
• However, the Maharashtrawadi Gomantak Party (MGP), a political party which strongly favoured the merger with Maharashtra was not prepared to wait for ten years.
• In fact, the MGP was the first ruling party in Goa which had come to power in the elections that were held after the Portuguese left.
• The party saw its victory as a confirmation that Goans wanted to merge with Maharashtra.
• The society was divided on the issue. The chief language of the people was Konkani. Most Konkanis were also bilingual and they spoke Marathi as well. Some people also felt Konkani to be a dialect of Marathi and they were in favour of the merger with the larger state of Maharashtra.
• However, there were many others who felt that Konkani was a distinct language of its own and that the merger with Maharashtra would make the interests of the Konkani people secondary.
• The other party in the state with the opposing stance was the United Goans Party (UGP).
• Even though the MGP had come to power and according to them could easily pass a bill in the assembly which would merge Goa with Maharashtra, the UGP pressed for a referendum since it was an important decision and one that affected people directly. Therefore, instead of the people’s representatives voting for a decision (as would normally take place in a representative democracy like India), the people themselves voted in the referendum.
• UGP leader Dr. Jack de Sequeira worked hard for the referendum. He also wanted expatriate Goans living in other parts of India and abroad to get a vote, but this was denied.
• The question was voted in the Indian Parliament and passed by both Houses. The Goa, Daman and Diu (Opinion Poll) Act received presidential assent on 16th December 1966 and the referendum itself was held on 16th January 1967.
• The people of Goa and Daman and Diu voted against the merger with Maharashtra. 54% of the people voted against the merger.
• A resolution was passed in the Goa Assembly demanding full statehood in 1976. Goa finally became a state on 30th May 1987. Daman and Diu were separated and made a UT.