One in every six loans disbursed under the Emergency Credit Line Guarantee Scheme (ECLG Scheme) has turned bad in just 27 months. ECLG scheme was launched as part of the Covid-19 relief package in May 2020. This was revealed by the information obtained under the Right to Information Act.



  • Replying to an RTI, the NCGTC has said that loans to 16.22 lakh accounts, or 16.4 per cent of the total 98.86 lakh accounts, disbursed since May 2020 turned into Non-Performing Assets (NPA).
    • NPA, in general, is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
    • Loans disbursed under the ECLGS were to be categorised as NPAs when they remained unpaid even three months after the two-year moratorium.
  • The defaults are mainly in the lower end of the loan bands (up to Rs 20 lakh), the data reveals.
  • These defaults are indications of the continuing distress in the MSME sector.
    • MSME classification:
      • Micro units are categorised as units with investments in plant, machinery/ equipment up to Rs 1 crore and turnover of less than Rs 5 crore.
      • Small units are those with investment limit in plant, machinery/ equipment of Rs 10 crore and a turnover of less than 50 crore.
      • A unit is a medium enterprise, if it has investments in plant, machinery/ equipment of up to Rs 50 crore and a turnover of less than Rs 250 crore.


About the ECLGS

  • The ECLGS was unveiled as part of the comprehensive package announced by Finance Ministry.
    • ECLGS was launched in different phases – ECLGS 1.0, ECLGS 2.0, ECLGS 3.0, ECLGS 4.0.
  • This scheme was launched to aid Micro, Small and Medium Enterprises (MSMEs) sector in view of the economic distress caused by the COVID-19 pandemic.
  • In different phases, the scope of this scheme was increased to include multiple sectors.
  • The scheme is under the operational domain of Ministry of Finance, Department of Financial Services (DFS).
    • National Credit Guarantee Trustee Company Ltd (NCGTC) has been set up as a company by the Union Ministry of Finance to manage and provide guarantees to these loans.
  • Purpose –
      • The ECLGS aims to provide 100% guaranteed coverage to the banks, non-banking financial institutions (NBFCs) and other lending institutions.
      • The idea was to enable these lending institutions to extend emergency credit to business entities that have suffered due to the Covid-19 pandemic and are struggling to meet their working capital requirements.


Working of the scheme

  • The overall ceiling initially announced for ECLGS was Rs 3 lakh crore which was subsequently enhanced to Rs 4.5 lakh crore. Recently, in August 2022, the government increased the ceiling to 5 lakh crore to include the hospitality sector.
  • However, ECLGS is a demand driven scheme. Hence, sanctions/disbursements are made by lending institutions based on assessment of borrower’s requirement and their eligibility.
  • As of August 5, 2022, loans of ₹3.67 lakh crore have already been sanctioned under the scheme. More than 1.14 crore borrowers have been issued guarantee under the scheme.