Banks seek ECLGS extension, payments companies want zero-MDR gone

In 2021, the outlay under the scheme was enhanced to Rs 4.5 lakh crore, with an incremental support of 10% being guaranteed over and above the initial 20% support amount.

Banks have also sought special rebates or additional depreciation for expenditure made on financial inclusion activities and promoting digital banking, among other activities.
Banks have also sought special rebates or additional depreciation for expenditure made on financial inclusion activities and promoting digital banking, among other activities.

Banking industry lobby Indian Banks’ Association (IBA) has requested the government to extend the Emergency Credit Line Guarantee Scheme (ECLGS) by another year to March 31, 2023. The Covid-era credit guarantee scheme is targeted at smoothening financing for small enterprises and an extension will support micro, small and medium enterprises (MSMEs), who still need help, bankers said.

According to the latest notification issued by the National Credit Guarantee Trustee Company (NCGTC) on October 4, 2021, the ECLGS will be in force till March 31, 2022, or till guarantees for loans worth Rs 4.5 lakh crore have been issued. In its first iteration, issued in May 2020, the scheme offered a 100% government guarantee for 20% additional funding to eligible MSMEs. In 2021, the outlay under the scheme was enhanced to Rs 4.5 lakh crore, with an incremental support of 10% being guaranteed over and above the initial 20% support amount.

“The measures banks have requested are mostly pertaining to support for MSMEs, who are yet to fully recover from the blows of the pandemic. We are specifically asking for an extension for the ECLGS,” a senior banker said. A recent report by the State Bank of India’s (SBI’s) economic research division said of the extended limit of Rs 4.5 lakh crore, 64.4%, or Rs 2.9 lakh crore, had been sanctioned by November 21, 2021.

In a separate representation to the government, payments industry body Payments Council of India (PCI) has requested a rollback of the zero-MDR (merchant discount rate) regime for Unified Payments Interface (UPI) and RuPay debit cards or to incentivise the industry with a Rs 4,000-crore allocation to compensate for the revenue lost thereof. The zero-MDR regime, under which merchants have to pay no fee to payment infrastructure providers for UPI and RuPay debit card transactions, has been in place since December 2019.

Vishwas Patel, chairman, PCI, and director, Infibeam Avenues, said, “We request the government to consider a rollback of zero-MDR, with a view to broaden and significantly grow the merchant acceptance base particularly in the MSME space and also to facilitate the deployment of payments infrastructure by non-bank players, who have been the biggest deployers of capital in this area for the past few years.”

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