The Budget on Tuesday proposed to extend the validity of its flagship guaranteed loan scheme by a year through March 2023 and widened its coverage by Rs 50,000 crore to Rs 5 lakh crore, acknowledging the need for a protracted period of succour to start-ups and small businesses as they grapple with the spread of the latest Covid strain.
To top it up, the government will revamp the extant Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) to facilitate an additional credit of as much as Rs 2 lakh crore. It will also earmark an outlay of Rs 6,000 crore for a five-year period to roll out the Raising and Accelerating MSME performance (RAMP) programme, an initiative to revitalise the Covid-hit MSMEs.
The additional credit limit of Rs 50,000 crore of the stepped-up Emergency Credit Line Guarantee Scheme (ECLGS), however, has to be used to bolster healthcare infrastructure by lending only to hospitality and related enterprises, finance minister Nirmala Sitharaman declared.
The extension of ECLGS validity will benefit a wider pool of businesses that haven’t been able to tap the scheme yet. Against the current limit of Rs 4.5 lakh crore (which was enhanced from Rs 3 lakh crore last year), credit of less than `3.5 lakh crore has been sanctioned yet, as economic recovery is dealt a fresh blow by the Omicron spread, according to banking sources.
Highlighting the success of ECLGS, Sitharaman said as many as 1.3 crore MSMEs had been provided additional credit under this scheme. Separately, according to a report by SBI group chief economic adviser Soumya Kanti Ghosh this month, ECLGS has prevented 1.35 million MSME accounts from turning bad. It has saved around 15 million jobs and prevented 14% of outstanding MSME loans from turning into non-performing assets.
Similarly, through the CGTMSE, the government will offer guarantee to catalyse the flow of institutional credit to these small businesses without collateral. In FY21, about 8.36 lakh guarantees were approved, covering loans of `36,954 crore.
As for the RAMP programme for MSMEs, the World Bank last year approved a loan of $500 million (about Rs 3,750 crore) to support it. According to its assessment, over 40% MSMEs in India lack access to formal sources of finance. The programme typically aims at improving market access, access to credit, bolstering institutions and governance at the central and state level.
The government will also link key portals — Udyam, e-shram, NCS and ASEEM – meant for MSMEs and expand their scope to brighten their business prospects. “They will now perform as portals with live, organic databases, providing G2C, B2C and B2B services. These services will relate to credit facilitation, skilling, and recruitment with an aim to further formalise the economy and enhance entrepreneurial opportunities for all,” Sitharaman said.