Everything You Need to Know About ECLGS (Emergency Credit Line Guarantee Scheme)
The Emergency Credit Line Guarantee Scheme (ECLGS) is a government-backed credit guarantee scheme launched in India in 2020 as part of the Aatmanirbhar Bharat initiative. It was designed to provide urgent financial support to MSMEs, business enterprises, and other eligible borrowers affected by the COVID-19 pandemic to help cover their operational liabilities and restart business activities.
What Is ECLGS?
ECLGS offers 100% government-guaranteed collateral-free loans to eligible borrowers, supporting businesses struggling with liquidity and cash flow due to the pandemic. It enables lending institutions—banks, NBFCs, and others—to provide emergency credit without the risk of losing out in case of default.
Phases of ECLGS
Since launch, ECLGS has evolved through multiple phases to extend support to a wider range of businesses and sectors:
ECLGS 1.0: Provided up to 20% additional credit on outstanding loans as of February 29, 2020, for MSMEs and businesses with loan limits up to Rs. 25 crore and turnover up to Rs. 100 crore.
ECLGS 2.0: Expanded scope including businesses with loans up to Rs. 50 crore and turnover up to Rs. 250 crore.
ECLGS 3.0: Further extended loan limits and sectors, including travel, tourism, hospitality, sports, and leisure.
ECLGS 4.0: Focused on sectors like healthcare, eligible for higher loan amounts (up to Rs. 2 crore per borrower).
Each phase comes with revised eligibility, extended loan tenure, and higher limit percentages (up to 50% for some sectors).
Key Features of ECLGS
Loan Amount: Up to 20-50% of outstanding loans as on February 29, 2020, based on the phase and sector eligibility.
Interest Rate: Nominal and competitive, around 14% per annum fixed, reducing borrower burden.
Tenure: Typically 4 to 6 years with moratorium on principal repayments for the first year; interest payment applicable during moratorium.
Collateral & Guarantee: No collateral or third-party guarantee required; loans are 100% guaranteed by National Credit Guarantee Trustee Company Ltd (NCGTC).
Processing & Prepayment: No processing fees, foreclosure, or prepayment penalties apply.
Eligible Borrowers: MSMEs, business enterprises, individual borrowers who had outstanding loans as of February 29, 2020, meeting specific performance criteria.
How ECLGS Helps Businesses
Provides immediate working capital support to maintain operations during challenging times.
Enhances liquidity to pay salaries, vendors, and meet day-to-day expenses.
Prevents business closures and protects jobs.
Stimulates economic growth by helping businesses restart and scale up.
Eligibility Criteria
Business must have a valid loan outstanding as on February 29, 2020.
Account should not be non-performing or classified as a bad loan as of that date.
Must be GST registered where applicable.
Borrower must meet sector-specific criteria per scheme phase.
FAQ – FREQUENTLY ASKED QUESTIONS
What is the main purpose of ECLGS?
To provide collateral-free emergency credit guaranteed by the government to MSMEs and businesses affected by the COVID-19 pandemic, supporting their operational needs.
Who is eligible for the ECLGS loan?
MSMEs, business enterprises, and individual borrowers with outstanding loans as of February 29, 2020, meeting specified credit and sector conditions.
How much can I borrow under ECLGS?
Loan amount varies from 20% to 50% of the outstanding credit as on February 29, 2020, depending on the scheme phase and sector.
Is collateral required for an ECLGS loan?
No, the loans under ECLGS are collateral-free and come with 100% government guarantee.
What is the tenure and repayment structure of the ECLGS loan?
Typically 4 to 6 years with a moratorium of 1 year on principal repayment; interest is payable during the moratorium.
Are there any processing fees or prepayment charges?
No, ECLGS loans have no processing fees, foreclosure charges, or prepayment penalties.
Can the ECLGS loan be used for new businesses?
No, only existing borrowers with outstanding loans as of February 29, 2020, are eligible.
Which sectors are covered under ECLGS?
All major sectors including MSMEs, hospitality, travel, healthcare (with focus in recent phases), and more.
Published on: July 24, 2025
Published by: PAVAN
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