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20% Guaranteed Credit Line Collateral Free Loan. Everything You Should Know

Emergency Credit Line Guarantee Scheme is a very beneficial scheme for the Indian business holders as in the time of lock down the financials are on the lower. Now the businesses are required a financial breath. By smelling the financial crunch of the business owners the govt has declared the package of 3 Lack crore rs in the form of ECLGS. The facility which will be provided under this scheme is guaranteed Credit Line (GCL). Guarantee will be given by Credit Guarantee Trust. This is an automatic loan scheme. Below are the 11 points which helps the one to understand each and every detail of this facility.

What is ECLGS?

Emergency Credit Line Guarantee Scheme is backed by Credit Guarantee Trust. This Scheme Says all the MSME can get a loan facility up to 20% of the outstanding exposures on 29 Feb 2020. For this facility Govt has parked the fund of 3 Lakh Crore Rs. This facility can be availed by the existing Financial Institutions only from where the loan is running. Single bank can also offer 20% of total outstanding depending upon the NOC from all the other institutions.

Validity of this scheme?

This scheme is valid till 31 Oct 2020 and up to 3lakh crore.

Who can get benefited with this scheme?

All the Proprietor Firms, Limited Company, Trust, Pvt. Ltd. Company, LLP, Mudra Loan Client.

How much will be loan the tenure?

Loan Tenure for this facility is 4 years cumulatively. For the First year there will be a moratorium where in the interest will be payable only. For the last 3 years the amount will be paid in 36 EMI’s.

What all bank are eligible to provide this facility?

All the Commercials Banks, NBFc’s and MFI’s are eligible to provide this facility to the clients depending upon 2 years operational experience.

In which form this facility will be provided?

Bank can provide this facility in the form of WCTL and NBFC’s can provide in the form of Term Loan. Separate loan account will be created for this facility. It will not be considered as any kind of Top Up.

On which loans this facility will be available?

All the loans which are opted in the business units for the business purposes will be eligible for this facility. None of the Proprietor, Partner, and Director’s loan in individual capacity will be eligible for the same. Loans considered will be Mortgage Loans, Working Capital Limits, Business Loans Etc

How will you get loan?

It will be the automatic pre approved loan. Either existing financial institution or the customer can approach to the bank for availing this facility.

What is the ROI for this facility?

ROI is capped at 9.25% for Banks and 14% for NBFC’s.

What are the eligibility criteria for the borrowers?

• Pos of all the loans cumulatively on 29 Feb. 20 should not be greater than 25 Cr.

• Turnover should not be greater than 100 cr in last Financial Year.

• Loan account should not be SMA 2 on 29 Feb 20 (Delay payments should not be greater than 60 Days)..

What are the benefits of this scheme?

• Zero processing

• Zero Guarantee Fees

• Zero Foreclosure

How the Lockdown Moratorium Calculation Works?

At the time of Corona Pandemic, RBI has instructed the Financial Institutions to supply the moratorium to their customers. Now how this Moratorium will affect the loan tenure and also loan repayment amount.

As every EMI has two components, first is principle and second is interest. Now when one EMI is paid, the outstanding loan reduced to the extent of the principle component which is there within the EMI. Now, In Next EMI the interest component are going to be lesser and principle component are going to be above the preceding EMI.

If we avail the moratorium of three months, Interest of the subsequent 2 months of moratorium are going to be an equivalent because it was for First EMI which we’ve deferred.

 Let’s know it with and Example Mr. Batra Has availed a loan against property of 20,00,000 Rs. @ 10% ROI for 60 months. He has got to pay the interest of 5,49,675 Rs for the loan tenure of 60 months. His Ist EMI debited on 1 Jan 2016. Now he has availed the moratorium. His EMI for Mar 20, Apr 20 and May 20 is 42495/- and therefore the Interest component for these 3 months consecutively is 3384, 3058 and 2729 Rs.

 After choosing the moratorium from Mar 20 his principle outstanding is 406066/- Rs. Now If he has opted for the moratorium for 3 months than his cumulative interest for 3 month is 10,152 Rs. His Total POS is now 4,16,218 Rs. (406066 Rs. + 10152) Rs.

After restructuring  his loan his revised tenure would be 60.26 months. Since the inception of his EMI till Feb 20, he has paid 50 EMI’s and 10 EMIs are left to be paid.

But after the deferment of three EMI’s his residual tenure has increased by 0.26 months or 7.8 days. It means he has got to pay the EMI of 42495 Rs for next 10.26 Months now.

Total interest after restructuring of his loan, the entire amount he has got to pay is 5,50,578 Rs. The additional amount of 11048 Rs  (0.26* 42495 Rs.) he has got to pay now. The additional payment of his loan after deferment is (5,50,578 Rs – 5,49,675 Rs) 903 Rs.

In this additional amount of 11048 Rs the interest component is 903 Rs. So Finally, He has got to pay the quantity of 903 Rs as Interest and 10,045 against the extra principle.

New Business Goal

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