The Ministry of Finance (MoF), Government of India (GoI), introduced the Guaranteed Emergency Credit Line (GECL) scheme in May 2020 to offer financial assistance to business enterprises or MSMEs across sectors that were hit dramatically by the Covid-19 pandemic.
It provides 100 percent guarantee coverage to lending institutions, such as banks and non-banking financial companies (NBFCs), on emergency credits offered to businesses so that they can overcome the losses incurred during the pandemic and meet their working capital requirements.
In simple terms, the government takes full responsibility to bear the losses on behalf of the businesses if they default to repay the credit to the lending institutions.
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What are the Guaranteed Emergency Credit Line Extensions?
The Guaranteed Emergency Credit Line (GECL) was started as a part of the INR 20 lakh crore covid-relief package under the AtmaNirbhar Bharat Abhiyan scheme. The purpose of the scheme was to offer INR 3 lakh crore of loans to micro, small, and medium enterprises (MSMEs), which were wholly collateral-free and government-guaranteed credit.
Later, four versions of GECL were introduced based on various aspects, known as GECL 1.0, GECL 2.0, GECL 3.0 and GECL 4.0. Let’s discuss each emergency credit line extension in detail.
| Particulars | GECL 1.0 | GECL 2.0 | GECL 3.0 | GECL 4.0 |
| Purpose | To provide collateral-free and fully guaranteed additional credit of 20 percent to businesses. | To extend the scheme to 26 sectors majorly affected by the pandemic, identified by the government. | To extend support to hospitality, travel and tourism, leisure, and sporting sectors. | To extend support to existing borrowers for setting up hospitals, nursing homes, clinics, medical colleges, and manufacturing of liquid oxygen, oxygen cylinders etc. |
| Outstanding Credit | INR 25 Crore | INR 50 Crore – INR 500 Crore | INR 500 Crore | |
| Annual Turnover Cap | INR 100 Crore (in the financial year 2019-2020) | |||
| Interest Rate | Capped at9.25 percent – Banks14 percent – NBFCs | |||
| Moratorium Period | 1 Year | 2 Year | ||
| Repayment Period | 4 Year | |||
| Additional Credit | 20 percent of the overall outstanding credit on February 29, 2020, subject to the borrower meeting all other eligibility criteria. | 40 percent of the overall outstanding credit on February 29, 2020, subject to the borrower meeting all other eligibility criteria. | Up to INR 2 Crore, subject to the borrower meeting all other eligibility criteria. | |
| Charges | No additional charges | |||
| Validity | March 31, 2022 |
Eligibility for Availing Guaranteed Emergency Credit Line Loan
The guaranteed emergency credit line loan eligibility criteria are mentioned below.
GECL 1.0 Eligibility Criteria:
- Business enterprises/ MSMEs that have an outstanding loan of INR 50 Crore as of February 29, 2020.
- The borrower account should be less than or equal to 60 days past due as of February 29, 2020.
- Must have an annual turnover cap of INR 100 crore in the financial year 2019-2020.
- The borrower must be a member of the GST or Goods and Services Tax registrar.
- The borrower must not be a status of SMA-2 and/or NPA as of February 29, 2020.
GECL 2.0 Eligibility Criteria:
- Business enterprises/MSMEs with an outstanding loan of more than INR 50 Crore and less than INR 500 Crore as of February 29, 2020.
- The borrower account should be less than or equal to 60 days past due as of February 29, 2020.
- The borrower must belong to the 26 sectors identified by the government – power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and jewellery, cement, auto components, hotels-restaurants-tourism, mining, plastic product manufacturing, automobile manufacturing, auto dealerships, aviation, sugar, ports and port services, shipping, building materials, and corporate retail outlets.
- Must have an annual turnover cap of INR 100 crore in the financial year 2019-2020.
- The borrower must be a member of the GST or Goods and Services Tax registrar.
- The borrower must not be a status of SMA-2 and/or NPA as of February 29, 2020.
GECL 3.0 Eligibility Criteria:
- Business enterprises/MSMEs with an outstanding loan of more than INR 500 Crore as of February 29, 2020.
- The borrower account should be less than or equal to 60 days past due as of February 29, 2020.
- The borrower must belong to the hospitality, travel and tourism, leisure, and sporting sectors.
- Must have an annual turnover cap of INR 100 crore in 2019-2020.
- The borrower must be a member of the GST or Goods and Services Tax registrar.
- The borrower must not be a status of SMA-2 and/or NPA as of February 29, 2020.
GECL 4.0 Eligibility Criteria:
- Business enterprises/MSMEs with an outstanding loan of more than INR 500 Crore as of February 29, 2020.
- The borrower account should be less than or equal to 90 days past due as of February 29, 2020.
- Must be existing borrowers who need credit for setting up hospitals, nursing homes, clinics, medical colleges, and manufacturing liquid oxygen, oxygen cylinders, etc.
- Must have an annual turnover cap of INR 100 crore in 2019-2020.
- The borrower must be a member of the GST or Goods and Services Tax registrar.
- The borrower must not be a status of SMA-2 and/or NPA as of February 29, 2020.
Benefits of Guaranteed Emergency Credit Line Scheme
Here are a few benefits of the Guaranteed Emergency Credit Line Scheme.
- Businesses can avail a credit of 20 percent of the total outstanding credit.
- Businesses belonging to hospitality, travel and tourism, leisure, and sporting sectors can avail up to 40 percent of the total outstanding credit.
- No collateral is needed.
- 100 percent government-guaranteed coverage.
- No additional charges are required.
- A maximum interest rate of 14 percent can be availed.
- Repayment period of 4 years.
How to Apply for Guaranteed Emergency Credit Line Loan?
Follow the mentioned step-by-step guide to applying for GECL.
- Before applying for GECL, make sure you are eligible and have all the required documents.
- Visit the lending institutions you want to take the credit from and request the bank officer to provide you with the application form. You can also download the application form from the official website of the lending institution.
- Perform the following steps
-Fill up the form completely with all the relevant information and sign wherever required.
-Attach all the required documents.
-Attach your photograph.
(Request the banking officer to help you if you find it difficult to fill the form at any point.) - Submit the form to the banking officer and collect the receipt.
- Wait for further instructions provided by the banking officer.
You can also apply for GECL online from the official website of the lending institutions. You need to fill up and submit a few details, after which the banking officer will get in touch with you.
Overview of Indian Business Enterprises and MSMEs at a Glance
The Government of India (GoI) has taken up a great initiative in helping the business enterprises and MSMEs sustain during the covid situation. As per the survey conducted by the Ministry of Corporate Affairs (MCA), in the financial year 2019-2020, 3,380 companies have voluntarily winded up their operations. As a result, the government initiated the GECL, which successfully curbed the numbers to 1,107 companies in 2020-2021.
