The Emergency Credit Line Guarantee Scheme (ECLGS) was implemented after the coronavirus pandemic first hit the country in March 2020. The primary objective of the scheme was to help several Micro, Small and Medium Enterprises (MSME) in light of the economic duress imposed due to the mobility restrictions and lockdowns in the country.

Under this scheme, banks provide additional collateral-less loans to existing borrowers. These loans are fully guaranteed by the government against any credit loss that might be incurred, leading to faster sanctions and disbursements.

Over the course of the pandemic and various lockdowns, the ECLGS has effectively ensured continued funding to the impacted MSMEs of the country. The finance minister underlined in Budget 2022-23 that the scheme has provided much-needed additional credit to more than 130 lakh MSMEs. This has contributed extensively to safeguarding them against the adverse impact of the ongoing pandemic. However, she highlights several sectors, especially MSMEs in the hospitality sector, are yet to achieve their pre-pandemic output levels. Therefore, it remains significant to extend the scheme for the next fiscal year as well. It was informed that the cover be expanded by INR 50,000 crore to cover a total amount of INR 5 lakh crore, with a separate amount for hospitality and related enterprises.

This article was authored by Srijata Deb.