ELCGS-Type Mechanism In Works For Credit Guarantee Cover To Businesses: Official

The government is considering rolling out an ECLGS-type mechanism, entailing a credit guarantee cover and collateral-free lending, for businesses amid the West Asia crisis, an official said on Thursday.

In 2020, the government launched the Emergency Credit Line Guarantee Scheme (ECLGS) as part of the Aatmanirbhar Bharat Abhiyaan to support eligible Micro, Small and Medium Enterprises (MSMEs) and other eligible business enterprises for meeting their operational liabilities and restarting their businesses in the context of the disruption caused by the COVID-19 pandemic.

Addressing the CII MSME Leadership Summit 2026 here, Ateesh Kumar Singh, Additional Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), said that "there is a thought of coming up with an ECLGS kind of mechanism, which can entail collateral-free lending and with a credit guarantee cover and also restructuring and moratorium as part of that credit facility".

"There is also work going on with respect to the raw material procurement through the NSIC programme. There is also some thought with respect to finding some relief on the regulatory forbearance from the RBI and other regulators. So, these are things which are presently in the works," Singh informed.

He also sought feedback from the industry on the above measures being examined.

ECLGS covered almost all sectors of the economy, and a 100% guarantee was provided to Member Lending Institutions (MLIs) in respect of the credit facility extended by them under the scheme to eligible borrowers.

The structure of the scheme permitted easy access to credit, as lenders offer pre-approved loans based on the borrower's existing credit outstanding, and there is no fresh appraisal undertaken by lenders since additional credit was sanctioned over and above the credit facilities already assessed.

The interest rate was also capped to lower the credit cost, and loans were sanctioned without any processing, pre-payment charges and guarantee fees. The scheme continued till March 31, 2023.