Frequently Asked Questions
1). What is Guaranteed Emergency Credit Line (GECL)?
The GECL is a loan for which 100% guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to Member Lending Institutions (MLIs), and which will be extended in the form of additional working capital term loan facility in case of Scheduled Commercial Banks (SCBs) and Financial Institutions (FIs), and additional term loan facility in case of Non-Banking Financial Companies (NBFCs), to eligible MSMEs/ Business Enterprises, individual borrowers in case of the original loan having been for own business and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers. Credit under GECL would be up to 20% of the borrower's total outstanding credit up to Rs. 50 crore, excluding off-balance sheet and non-fund based exposures, as on 29th February, 2020, i.e., additional credit shall be up to Rs.10 crore.
2). What is the objective of the Scheme?
The Scheme is a specific response to the unprecedented situation COVID-19. It seeks to provide much needed relief to the MSME sector by incentivizing MLIs to provide additional credit of upto Rs. 3 lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses
3). What is the Emergency Credit Line Guarantee Scheme?
The Emergency Credit Line Guarantee Scheme provides 100% guarantee coverage by NCGTC to MLIs on GECL of up to Rs. 3 lakh crore to eligible MSMEs. MSMEs for the purpose of this Scheme will include MSMEs/ Business Enterprises which are constituted as Proprietorships, Partnerships, Registered Companies, Trusts and Limited Liability Partnerships (LLPs), interested borrowers under PMMY, and also loans to individuals for business purpose.
4). Who are the MLIs under the Scheme?
All SCBs are eligible as MLIs. NBFCs which have been in operation for at least 2 years as on 29.2.2020, and FIs will also be eligible as MLIs under the Scheme.
5). What will be the definition of FIs for the purpose of this Scheme?
FIs for the purpose of this Scheme will be as defined under sub-clause (i) of clause (c) of Section 45-I of RBI Act.
6). What is the duration of the Scheme?
The Scheme would be applicable to all loans sanctioned under GECL during the period from May 23, 2020 to 31st October, 2020, or till an amount of Rs. 3 lakh crore is sanctioned under GECL, whichever is earlier.
7). What would be the guarantee coverage under the Scheme?
The entire funding provided under GECL shall be provided with a 100% credit guarantee coverage by NCGTC under the Scheme.
8). What will be the eligibility criteria for MSMEs to avail the benefit of the Scheme?
The eligibility criteria under the Scheme are as under:
- All MSME borrower accounts with combined outstanding loans across all MLIs of up to Rs. 50 crore as on 29.2.2020, and annual turnover of up to Rs. 250 crore in FY 2019-20. In case accounts for FY 2019-20 are yet to be audited/finalized, the MLI may rely upon the borrower's declaration of turnover
- The Scheme is valid only for existing customers on the books of the MLI.
- Borrower accounts should be classified as regular, SMA-0 or SMA-1 as on 29.2.2020. Accounts classified as NPA or SMA-2 as on 29.2.2020 will not be eligible under the Scheme.
- The MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to MSMEs that are not required to obtain GST registration.
- Loans provided to individuals for own business purposes will be covered under the Scheme.
9). Will the Scheme also cover borrowers under PMMY?
Yes, loans under PMMY extended on or before 29.2.2020, and reported on the MUDRA portal shall be covered under the Scheme.
10). Will GECL be extended as a separate loan account, or as part of the existing loan account of the borrower?
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.
11). Will loans under the Scheme be automatically given without any application or solicitation from the borrower?
This is a pre-approved loan. An offer will go out from the MLI 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
12). What would be the procedure followed in case a borrower has loan accounts with multiple lenders?
- In case a borrower has existing limits with multiple lenders, GECL may be availed either through one lender or each of the current lenders in proportion depending upon the agreement between the borrower and the MLI.
- In case the borrower wishes to take from any specific lender an amount more than the proportional 20% of the outstanding credit that the borrower has with that particular lender, a No Objection Certificate (NOC) would be required from such lenders whose share of loan under ECLGS is being proposed to be taken from the specific lender. However, it would be necessary for the specific lender to agree to provide loan under ECLGS on behalf of such lenders
- No NOC will, however, be required if the GECL availed from a particular lender is limited to the proportional 20% of the outstanding credit that the borrower has with that lender.
13). To avail GECL, will it be necessary for existing loans of the borrower to be covered under existing guarantee schemes such as CGFMU or CGTMSE?
14). Will the interest rate on GECL be capped?
Yes, interest rates on GECL shall be capped as under:
- For Banks and FIs, one of the RBI prescribed external benchmark linked rates +1% subject to a maximum of 9.25% per annum.
- For NBFCs, the interest rate on GECL shall not exceed 14% per annum
15). What would be the tenor of loans provided under GECL?
The tenor of loans provided under GECL shall be four years from the date of disbursement. No pre-payment penalty shall, however, be charged by the MLIs in case of early repayment.
16). Is there any moratorium period prescribed under the Scheme?
Yes, a moratorium period of one year on the principal amount shall be provided for GECL funding. Interest shall, however, be payable during the moratorium period. The principal shall be repaid in 36 instalments after the moratorium period is over.
17). . Is any turnaround time prescribed for MLIs under the Scheme for sanction of GECL?
Indicative turnaround time for loans under the Scheme shall be the same as those prescribed by Department of Financial Services for credit support in the context of COVID-19 pandemic.
18). Will any guarantee fee be charged under the Scheme by NCGTC?
No, NCGTC will not charge any guarantee fee under the Scheme
19). Will any processing fee be charged by MLIs for sanction of loans under GECL?
Since additional credit under GECL is to be provided to existing customers, no additional processing fee shall be charged by lenders.
20). Will MLIs ask for any additional collateral for the GECL facility?
No additional collateral shall be asked by MLIs for additional credit extended under GECL.
21). . Will the categorization of existing loans extended through current Government schemes such as PMEGP or PMMY change if GECL is provided to such borrowers?
No. Existing loans extended through current Government schemes would continue to be categorized under that scheme as earlier. GECL under this Scheme shall be over and above the existing loan.