The term "Rs 3 lakh crore" primarily refers to the initial corpus of the Emergency Credit Line Guarantee Scheme (ECLGS), a financial scheme launched by the Government of India. Its origin lies in the economic response to the COVID-19 pandemic, being the second-biggest component of the Rs 20 lakh crore comprehensive package announced under the Aatma Nirbhar Bharat Abhiyan. The scheme was approved by the Union Cabinet in May 2020 to mitigate the severe economic distress and liquidity crisis faced by the Micro, Small, and Medium Enterprises (MSMEs) due to the nationwide lockdown.
The ECLGS mechanism works by providing a Guaranteed Emergency Credit Line (GECL) facility. The National Credit Guarantee Trustee Company (NCGTC) provides a 100% guarantee coverage to Member Lending Institutions (MLIs) like banks and Non-Banking Financial Companies (NBFCs) against losses on the loans. Eligible MSMEs and MUDRA borrowers could receive additional funding up to 20% of their total outstanding credit as of February 29, 2020. Interest rates were capped at 9.25% for banks and financial institutions and 14% for NBFCs. The loan tenor was four years, including a one-year moratorium on principal repayment.
The scheme connects directly to the MSME sector and the broader Aatma Nirbhar Bharat Abhiyan. The initial scheme was later expanded and extended until March 31, 2021, to include 26 stressed sectors identified by the K.V. Kamath Committee, such as aviation and construction, and individuals like doctors and lawyers. The overall limit of the scheme was also subsequently proposed to be hiked to Rs 5 lakh crore.