Govt’s flagship credit scheme for MSMEs: The Emergency Credit Line Guarantee Scheme (ECLGS), which was launched post-Covid for emergency credit to MSMEs and was valid till March this year, has recorded non-performing assets (NPAs) amounting to Rs 13,233 crore as of June 30, 2023.
According to the data shared by Bhagwat Karad, Minister of State in the Finance Ministry in a written reply to a question in the Lok Sabha on July 24, the bad loans constituted 5.45 per cent of the total MSME loan amount of Rs 2.42 lakh crore guaranteed under ECLGS, as per data from the National Credit Guarantee Trustee Company (NCGTC). NCGTC was the guarantee provider to member lending institutions including banks and NBFCs with respect to the credit given to borrowers on their loan outstanding as of February 29, 2020, under ECLGS.
The 5.45 per cent NPAs, however, “is considered reasonable keeping in view the severity of the impact that the pandemic has had on businesses, particularly for MSME enterprises,” Karad noted in his response.
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Within MSME loans under ECLGS, 1.11 crore loans were to micro and small enterprises (MSEs) with guarantees amounting to Rs 1.78 lakh crore. Out of this, 18.65 lakh accounts amounting to Rs 11,341 crore were classified as NPAs. In terms of the amount, the share of NPAs constituted 6.36 per cent of total loans guaranteed for MSEs, according to the data shared.
In the wake of the pandemic, the government had rolled out ECLGS in May 2020 to support eligible MSMEs and business enterprises to ease their liquidity position. The scheme offered collateral-free loans to existing eligible borrowers with a 100 per cent guarantee in respect of the eligible amount as per the scheme guidelines. As per NCGTC, Rs 2.42 lakh crore guarantees benefitted 113.75 lakh MSMEs.
According to a research report in January this year by the State Bank of India on ECLGS, almost 14.6 lakh MSME accounts, of which about 98.3 per cent of the accounts were in the micro and small enterprises categories were saved from turning bad.
In absolute terms, MSME loan accounts worth Rs 2.2 lakh crore had improved since the inception of ECLGS for banks. This meant that around 12 per cent of the outstanding MSME credit was saved from slipping into NPA classification due to ECLGS, Karad added.
“Further, the incidence of NPAs in lending by banks, including in the MSME sector, is attributable to a number of factors, which include overall performance of the borrowing entity, macroeconomic conditions, sectoral issues, global business environment, etc.”