Frequently Asked Questions on 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

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 up to
Rs. 3 lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and
restart their businesses

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.

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.

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.

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

The entire funding provided under GECL shall be provided with a 100% credit guarantee coverage
by NCGTC under 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.

Yes, loans under PMMY extended on or before 29.2.2020, and reported on the MUDRA portal
shall be covered under the Scheme.

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.

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.

  • 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.

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

The Scheme may also be operated in combination with applicable interest subvention schemes,
as far as feasible.

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.

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.

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.

No, NCGTC will not charge any guarantee fee under the Scheme.

Since additional credit under GECL is to be provided to existing customers, no additional
processing fee shall be charged by lenders.

No additional collateral shall be asked by MLIs for additional credit extended under GECL.

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.

Zero risk weight be assigned to the credit facilities extended under GECL, as per RBI Circular No.
76/21.06.201/2019-20 dated June 21, 2020.

The credit under GECL will rank second charge with the existing credit facilities in terms of cash
flows (including repayments) and securities, with charge on the assets financed under the
Scheme to be created within a period of 3 months from the date of disbursal.

Yes, MLIs will be required to submit an Undertaking to NCGTC for the purpose of this Scheme.

75% of the guaranteed amount will be paid by NCGTC within 30 days of an eligible claim being
preferred by the MLI concerned. The balance 25% will be paid on conclusion of recovery
proceedings or till the decree gets time barred, whichever is earlier

NCGTC has issued the detailed operational guidelines for the Scheme. The Management
Committee for ECLGS fund will have the authority to approve any changes to the current structure
of the Scheme/ operational guidelines.

You are eligible if

  1. you have total credit outstanding of Rs. 50 Crore or less as on 29th Feb 2020
  2. your turnover for 2019-20 was up to Rs. 250 Cr.
  3. You have a GST registration or were not required to obtain such GST registration

Udyog Aadhar or recognition as MSME is not required under this Scheme

Under ECLGS, Banks/ NBFCs are to offer loans up to 20%. Actual loan extended can therefore
be less than 20%. This is generally on mutually agreed terms between the borrower and the
lender based on factors relevant to the business operations.

No . Typically lending institutions get funds from banks/ NBFCs through on lending, refinance,

asset purchase, securitization, assignment etc. There are therefore other windows available

including the Partial Credit Guarantee Scheme and the Special Liquidity Facility.

No. The NBFC must be registered with RBI, should be meeting the CRAR requirements

prescribed by RBI and have been in lending business for at least two years as on 29th Feb 2020.

The Managing Committee of the Scheme may prescribe additional qualification criteria from time

to time.

This will be advised in due course through additional guidelines to be issued.

ECLGS scheme is only for existing borrowers on the books of the banks as on 29th Feb 2020.
Any new borrower can, however,be covered under the ongoing CGTMSE and NCGTC schemes

No, the scheme does not cover the off-balance sheet exposure. Only on balance sheet exposures outstanding as on 29th Feb, 2020 are eligible to be covered under the scheme.

As per RBI guidelines dated September 04, 2019 & February 26, 2020, all loans to MSMEs
must be benchmarked to one of the external benchmark rates. Banks are free to decide the
spread over the external benchmark as per their approved policies. Accordingly, loans under the
ECLGS must adhere to the above-mentioned guidelines and linked to the external benchmark
rates.
As part of the Scheme, overall lending rate is capped at 1% above the external benchmark
lending rate or 9.25% p.a. whichever is lower. Loans which are allowed not to be benchmarked
to external rates shall be capped at maximum of 9.25%.
For e.g. for Bank ABC External Benchmark Lending Rate is 7.80 %; i.e. RBI Repo Rate (4.0%)
+ Spread (3.80%). For the purpose of this scheme the lending rate would be Min of (7.8% + 1%
= 8.8% and 9.25%) = 8.8% in this case.
For e.g. for Bank ABC1 External Benchmark Lending Rate is 8.50 %; i.e. RBI Repo Rate
(4.0%) + Spread (4.50%). For the purpose of this scheme the lending rate would be Min of (8.5%
+ 1% = 9.5% and 9.25%) = 9.25% in this case.

Accounts that are NPA or where overdues have crossed 60 days (SMA-II) are not eligible
under ECLGS.

While a NBFC lender can charge a rate of interest higher than 14%, such a loan would not be
eligible for guarantee coverage

As per the system developed by us for issue of guarantee under ECLGS, once a lender enters
the details of the loan sanctioned to an eligible borrower as per the scheme guidelines, the system
shall approve the guarantee automatically and will provide Application Reference No. and Credit
Guarantee Number to the lender, which shall be used by the lender for later references.
No documents are sought at the time of application lodgement of guarantee, except in the
case of individual loans where a management certificate certifying that the original loan was for
business purposes..

The guarantee is available to the existing lender for the additional loan extended during the
specified period. Thus, the lenders on whose book these borrowers currently are can provide
these facilities provided the borrowers meet all the eligible conditions as defined in the scheme
guidelines. It should be noted that the eligible amount for loan under ECLGS is 20% of the
outstanding amount as on 29th Feb 2020. The buyer of the pool should be an MLI under the
Scheme.

The facilities provided under ECLGS are eligible for securitization. Since the facility is to be
opened as a separate loan account it can be treated at par with normal loans for securitization
purpose. Other conditions of eligibility must be fulfilled.

Mere transfer of loan from one lender to the other will not invalidate the customer or reduce
the maximum loan eligibility available to such customer under this scheme, provided the lender
taking over is also eligible under the scheme as per the criteria defined in the scheme guidelines.
MLIs should note that the overall loan under the scheme will be capped at overall
outstanding as on 29th Feb, 2020

MSME portfolio of HFC will be eligible. All MSME Loans must be given to entities which are
eligible to be covered and provided other eligibility conditions are fulfilled

No format has been prescribed under the scheme. MLIs may use whatever they have been
following till now.

The Credit Guarantee from NCGTC would be unconditional and irrevocable.

Zero risk weight is to be assigned to the credit facilities extended under the scheme, as per
RBI Circular No. 76/21.06.201/2019-20 dated June 21, 2020.

Yes, they are eligible, provided

  1. they meet the other eligibility norms of the scheme and
  2. The lender should have reported loans extended by it on the Mudra portal.

The scheme is for business activities. Any activity that is classified as an MSME or a
business enterprise as per various guidelines issued by RBI or any Ministry from time to
time are eligible for coverage under the scheme. If the other norms of the scheme are
complied with, these institutions shall stand eligible.

No restriction has been imposed for such types of units as they would also have been
impacted by the pandemic and may suffer time and cost overrun. The concerned MLI
should ensure overall eligibility under the scheme.

It means a vehicle registered for commercial purposes.

The second charge assumes the nature of first charge after payment of full dues of first charge
holder. However, if the assets against which second charge was created itself are not there,
then the facility extended under ECLGS would become unsecured. New assets would not be
required for creating or sustaining the charge.

Yes, business loans availed by individuals for their own businesses shall be eligible under the
scheme. However, the MLI shall have to submit a suitable Management Certificate at the time
of lodgement of guarantee application.

Yes, you are eligible, provided you meet the other eligibility criteria of the scheme.

Yes, you are eligible, provided you meet the other eligibility criteria of the scheme.

You are eligible, provided the loan has been taken for your own business purpose and you
meet the other eligibility criteria of the scheme.

No, there are some validations in the system and hence modifications cannot be allowed.
However, on specific request from registered (at the time of enrolment) mail id of the MLI,
NCGTC would arrange to delete the guarantees issued and the MLI shall be able to apply
afresh for the guarantee in respect of loan to such borrowers.

NCGTC has already developed and circulated a module as per which the MLI ‘B’ can rectify
the Bureau outstanding. It may, however, be noted that MLI ‘B’ should retain the document
relating to Bureau outstanding as proof which would be required in case of claim settlement.

Yes, all scheduled RRBs are eligible. It may be mentioned here that subsequent to
amalgamation of certain RRBs which were previously scheduled, they are yet to be included
in Second Schedule of RBI Act, but considering that RBI has already commenced the process
to include them in the Schedule which may take some time and the fact that they were earlier
scheduled, they are also eligible under ECLGS.

A page would be created on the portal for takeover cases wherein MLI ‘B’ would have to enter
certain details about the borrower being taken over from MLI ‘A’– it would include fields like
borrower name, names of MLIs ‘A’ & ‘B’, CGPAN number of MLI ‘A’, loan account number,
Management Certificate of having taken over the loan, etc. On submission of the same,
NCGTC would verify the details of transfer and on approval, fresh CGPAN number shall be
generated for MLI ‘B’ and a mail shall go to the registered mail ids of the two MLIs about shift
of guarantee from MLI ‘A’ to MLI ‘B’.
There would be no change in the repayment schedule, which should be as per scheme
guidelines and both MLIs should ensure the same.

A claim lodgement page shall be available on the portal, which is under development
presently. The MLI shall furnish the details of the account which would include date of NPA,
amount in default, status of legal action etc. The MLI may also be required to upload
Management Certificate certifying certain details about the account. On submission of this
claim, an e-mail shall go to the MLI that their claim has been lodged and NCGTC would initiate
action to approve the claim request and arrange to pay 75% of the amount in default within
30 days of the claim date provided all requisite documents are submitted and the claim is
found to be in order and complete in all respects. This shall be treated as Interim Claim.
The MLI shall also furnish details of the recoveries made in the account and after adjusting
such recoveries towards default amount relating to first charge and the legal costs incurred
by them, remit the balance amount to NCGTC within 30 days, failing which MLI shall be
required to pay the recovered amount along with interest at 2% over and above the prevailing
repo rate from the date of recovery to the date of payment.
On completion of the recovery Proceedings or till decree gets time barred, whichever is earlier,
the MLI shall submit its claim for the balance 25% of the amount in default (net of recoveries,
if not already remitted as above). Procedure for settlement of this Final Claim shall be the
same as that of Interim Claim except that in the case of loans to individuals, Management
Certificate shall be replaced by Statutory Auditor’s certificate.

The facility cannot be provided in respect of closed accounts. Hence, Entity ‘B’ would be
entitled to 20% of outstanding of entity ‘B’ alone, subject to meeting of other eligibility criteria
prescribed under the scheme.
However, if the constitution of entity ‘A’ gets changed to entity ‘B’ (and PAN gets changed)
subsequent to February 29, 2020, then entity ‘B’ shall be eligible for assistance as entity ‘A’
would have become eligible, had it continued to be in existence.

The Operational Guidelines of the scheme provide for second charge only on securities
available with an MLI. Nowhere any mention of obtention of any guarantee was stipulated.
The said FAQ was not an amendment to the guidelines, but just a clarification. MLIs who have
obtained guarantee in any form may take necessary steps to get the same cancelled to ensure
continuity of guarantee cover.

Yes, disbursement can be availed after October 31, 2020, but latest by December 31, 2020.

The lender can release his charge, but continue to hold the securities on behalf of NCGTC till
clearance of entire dues under the scheme.

Please address your queries/suggestions to ceo@ncgtc.in

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