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Things to Know About GECL Loan for Small Businesses in India

The Government of India and the Reserve Bank of India have taken several steps to address the issues that the Indian economy has encountered due to the COVID-19 crisis. The Guarantee Emergency Line of Credit Scheme has been established as a relief measure by the Department of Financial Services to provide 100% guarantee coverage for additional working capital term loans to qualifying borrowers.

Overview of GECL loan

The Guarantee Emergency Line of Credit [GECL] scheme is incorporated by the Government of India. A lender provides a  GECL loan up to 20% of the outstanding facility amount. The NCGTC fully guarantees the availability of this top-up facility. In 2014, NCGTC was established as a special purpose entity to function as a common trustee corporation to manage and operate multiple credit guarantee trust funds.

This scheme infuses around three lakh crore rupees into this sector. The government aims to minimise the MSME sector’s burden and help them rise to their previous financial standing through this loan. 

This loan facility will provide up to 20 % of the total outstanding liability for a borrower. That is, a borrower can avail of an additional 20% credit as per this scheme. As per this scheme, all enterprises registered as small, micro, and medium, including partnerships, proprietorships, trusts, registered companies and limited liability partnerships, are included. As per the recent changes, even many larger companies can be included in this scheme. Borrowers under the PMMY (Pradhan Mantri Mudra Yojana) also fall under this scheme. 

The main goal of this scheme is to motivate financial institutions, banks, and NBFCs to increase access and provide additional credit to MSME borrowers since they have suffered a lot of distress due to the pandemic. This scheme was introduced to battle the specific and unprecedented situation that has arisen due to the pandemic. The aim of this scheme is to encourage the MSME sector with additional credit so they can restart their business operations and meet their operational or working capital needs. This loan is provided with low-interest rates and is pre-approved. 


Financial institutions and scheduled commercial banks are considered Member Lending Institutions. All Non-Banking Financial Institutions that have been operating for over two years are also included as Member Lending Institutions.  

Who can use this scheme?

If you are a borrower with outstanding loans of less than Rs. 50 crore, you are eligible under this scheme. If your annual turnover is less than Rs. 250 crore, then you can use this scheme as well. 

You must be registered under the GST Act to be eligible for this scheme. You may not require Udhyog Aadhar Registration or be recognised as an MSME eligible for this scheme. 

Borrowers who have availed of loans under the Pradhan Mantri Mudra Yojana and are present on the Mudra portal can also avail of additional loans under this scheme with a special MSME loan interest rate

How to avail of this loan?

The MLI of the borrower sends them a pre-approved offer under this scheme. The borrowers can choose to accept or decline the loan offer. If the MSME accepts the loan offer, then they must complete the documentation process, which is quite quick. 

Guarantee Terms 

NCGTC has provided a 100 % credit guarantee to its MLIs (Member Lending Institutions). This loan will be provided as a form of additional working capital loan in case SCBs (Scheduled Commercial Banks) and FIs (Financial Institutions) and as an additional loan by NBFCs (Non-Banking Financial Companies). 

Under the GECL loan, the guarantee fee will not be charged, and you will not have to provide any further security to the lending institutions.

In case you do not meet the eligibility criteria to qualify for a GECL loan, you can consider a high-value unsecured business loan and get funds with quick approval and minimal paperwork. Leading financial institutions offer hassle-free business loans with simple eligibility and affordable rates.

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