ECLGS: Govt spent entire amount allocated towards implementation of credit guarantee scheme for FY21

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March 15, 2021 3:30 PM

Credit and Finance for MSMEs: Under ECLGS, 100 per cent guarantee coverage was provided by NCGTC to MLIs including public and private banks and NBFCs on the guaranteed emergency credit line of up to Rs 3 lakh crore to eligible MSMEs and other borrowers.

banking credit, creadit growth, growth in deposits, Care Ratings, increase in retail loans, string captive customer base,crisil ratingsBanks sanctioned Rs 2.46 lakh crore loan as of February 28, 2021 under ECLGS scheme.

Credit and Finance for MSMEs: The Finance Ministry, which had introduced the Emergency Credit Line Guarantee Scheme (ECLGS) last year through the Department of Financial Services (DFS) to support Covid-hit MSMEs, has spent the entire amount allocated towards the implementation of the scheme for the financial year 2020-21, according to the government data. The revenue expenditure incurred by the Department of Financial Services towards ‘assistance to the National Credit Guarantee Trustee Company (NCGTC)’, which is the guarantee provider under the ECLGS scheme to member lending institutions (MLIs), stood at Rs 4,000 crore as of January 22, 2021, according to the data shared by Minister of Finance Anurag Singh Thakur in the Lok Sabha on Monday. The amount allocated towards the same for FY21 was Rs 4,000 crore.

Under ECLGS, 100 per cent guarantee coverage was provided by NCGTC to MLIs including public and private banks and NBFCs on the guaranteed emergency credit line of up to Rs 3 lakh crore to eligible MSMEs and other borrowers. Banks extended additional working capital term loans up to 20 per cent of the MSMEs’ total outstanding credit up to Rs 25 crore as of February 29, 2020. ECLGS had the lion’s share – Rs 3 lakh crore — of the overall Rs 3.7 lakh crore MSME support package under the Atmanirbhar stimulus announced by the government last year.

An email to DFS Secretary Debasish Panda and Additional Secretary Sanjeev Kaushik seeking comments was sent. The story will be updated once comments are shared.

“If there was any expense, it was supposed to be towards the credit guarantee fund. For a credit guarantee fund, you envisage the NPA volume for the near future, for instance, if there are 20 per cent NPAs, then let’s say for Rs 1 lakh crore you will have to create Rs 20,000 crore fund and likewise, for Rs 3 lakh crore you will have to create Rs 60,000 crore fund. But this doesn’t happen in one go. It happens over a period of time. So, in the beginning, you need some money to create the fund. This Rs 4,000 might have been spent for the same,” Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small & Medium Enterprises (FISME) told Financial Express Online.

Also read: Targetting MSMEs in cross border e-commerce can help increase CBT revenue 4X: draft e-commerce policy

According to the latest data available on the sanctioning and disbursing of loan applications under ECLGS, banks had sanctioned Rs 2.46 lakh crore loan as of February 28, 2021, MSME Minister Nitin Gadkari had said in a written reply to a question in the Rajya Sabha. Moreover, out of the 92.27 lakh total borrowers under ECLGS as of February 28, 87.50 lakh (95 per cent) borrowers were MSMEs.

“The Aatmanirbhar Bharat Packages comprise of various long-term schemes/ programmes/ policies announced with the objective of fighting COVID-19 and to make the country self-reliant…The ministries/departments have been tasked to formulate schemes/programmes announced under AatmaNirbhar Bharat Packages concerning them, take necessary approvals and meet the expenditure out of fund provided in Budget Estimates and seeking additional funds in Revised Estimates, wherever necessary,” said Thakur in his written reply in the Lok Sabha.

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