One in every six disbursed under the Emergency Credit Line Guarantee Scheme (ECLG Scheme) launched during the Covid-19 pandemic has turned bad in the last 27 months. The majority of these are lower than Rs 20 lakh, a report by Indian Express (IE) stated.

The National Credit Guarantee Trustee Company Ltd (NCGTC) declared that 1.6 million accounts or 16.4 per cent of the total 9.8 million disbursed have turned into (NPAs), the report stated. NCGTC was set up to manage these loans.

In May 2020, the government announced the ECLG scheme. A two-year moratorium was allowed for the loans under ECLG. For NBFCs, the interest rate was capped at 14 per cent. The interest rate for other entities was fixed at 9.25 per cent. If they remained unpaid after the moratorium, the loans were to be declared as .

However, IE quoted a banker as saying that if one loan account of a customer turns bad, all the loans of the account holder are declared as NPA.

Loans under the ECLG Scheme are guaranteed by the government and 75 per cent of the loan amount is paid to the bank by the government immediately if the accounts become . If the money is not recovered, the government pays the 25 per cent to the bank.

A report by the State Bank of India (SBI) released in January said that the ECLGS was crucial to keep MSMEs afloat.

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We Fintax360 team simplify finances and taxes for millions of Indian businesses and people. We educate them about finances, taxes and improve their relationship with money.

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