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Wednesday, December 02, 2020

To maximise liquidity for MSMEs, govt may extend credit scheme deadline

Banks have sanctioned 62.52 per cent of the targeted Rs 3 lakh crore under the ECLGS for stressed MSMEs, while disbursements were at 45.38 per cent of the total amount as of October 5, up from 47.7 per cent sanctions and 32.9 per cent disbursements recorded as on August 12.

Written by Sunny Verma | New Delhi | October 26, 2020 3:12:02 am
liquidity for MSMEs, credit scheme deadline, stressed MSMEs, Banking sector, Indian economy, economy news, Indian express newsLaunched on May 23, the ECLGS is open until October 31 or until Rs 3 lakh crore has been sanctioned, whichever is earlier. (Express Photo by Arul Horizon)

The government plans to extend the deadline for Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs beyond October 31 in case the targeted loan sanction amount of Rs 3 lakh crore is not achieved, sources said.

Banks have sanctioned 62.52 per cent of the targeted Rs 3 lakh crore under the ECLGS for stressed MSMEs, while disbursements were at 45.38 per cent of the total amount as of October 5, up from 47.7 per cent sanctions and 32.9 per cent disbursements recorded as on August 12. Sources said the National Credit Guarantee Trustee Company Ltd (NCGTC), which is implementing this scheme, is running an aggressive campaign this month to enable increased funding to micro, small and medium enterprises (MSMEs).

Launched on May 23, the ECLGS is open until October 31 or until Rs 3 lakh crore has been sanctioned, whichever is earlier.

“The NCGTC has increased its outreach substantially this month. The idea is put the entire Rs 3 lakh crore to use so that liquidity can reach the maximum number of enterprises. Loan sanctions have picked up after individuals were allowed to take benefit. But even if we reach Rs 2.90 lakh crore of sanctions, then also there is a ground for extension of scheme,” a senior government official said.

As on October 5, 12 public sector banks, 24 private banks and 31 non-banking financial companies (NBFCs) sanctioned Rs 1.87 lakh crore under the scheme, of which Rs 1.36 has been disbursed to 27.37 lakh borrowers, government data showed. The amount of loan sanctions by private banks continued to remain higher when compared to state-owned ones.

While public sector banks (PSBs) sanctioned loans of Rs 81,648 crore, private bank sanctions were Rs 95,510 crore. Disbursals by PSBs and private banks were at Rs 68,814 crore and Rs 62,848 crore, respectively. The Rs 3-lakh crore ECLGS provides additional 20 per cent collateral-free credit to MSMEs fully guaranteed by the central government against loan losses.

Of the total 27.37 lakh loan accounts which received disbursement under the scheme, PSBs catered to 22.19 lakh accounts — or 81.09 per cent of total accounts — while private banks served 3.89 lakh customers. Share of disbursement by state-owned banks has come down from around 90 per cent in earlier months, while private banks and NBFCs have stepped up lending.

A total of 1.64 lakh individual borrowers were sanctioned Rs 17,460 crore and disbursed Rs 5,939 crore under the scheme.

The Centre had amended the ECLGS scheme in August to cover individual entrepreneurs, who run a large chunk of the over 6.3 crore MSMEs across the country. This enabled NBFCs to provide funding to borrowers who mostly take loans in their individual capacity, for instance, truck drivers, small shopkeepers, taxi drivers, lawyers, agriculture equipment owners and doctors and engineers with loans on equipment.

According to a recent survey published by the National Institute of Bank Management, micro enterprises have been the biggest beneficiary of the ECLGS, but it has been used mostly for immediate liquidity support, rather than business growth. The survey also highlighted various concerns — disbursement patterns being unequal as a large proportion of borrowers have received a small share of the total loan; low utilisation rate for the smallest borrowers and manufacturing firms.

Though under the ECLGS banks are not supposed to take any collateral from borrowers, it allows extension of charge on security for the existing loans which involves documentation and registration and stamp duty charges.

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