Credit and Finance for MSMEs: The scheme was launched in May last year to support Covid-hit MSMEs but was later extended till March 31, 2020, with the launch of ECLGS 2.0 that was expanded in scope.
The government had revised the MSME definition last year as part of the steps taken to help businesses recover from the Covid impact. (Photo source: IE)
Credit and Finance for MSMEs: Member lending institutions (MLIs) including public and private sector banks and non-banking financial companies (NBFCs) have sanctioned 76.6 per cent of the Rs 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) as of January 29, 2021. In a written reply to a question in the Rajya Sabha on Tuesday, MoS Finance Anurag Singh Thakur said that cumulative loans sanctioned, as reported by various MLIs to National Credit Guarantee Trustee Company Ltd (NCGTC) stand at Rs 2.39 lakh crore under ECLGS as of January 29, 2021.
This is up from the sanctioned loan amount of Rs 2,14,083 crore to 90,57,300 borrowers as of January 8, 2021. Out of the sanctioned amount, Rs 1,65,886 crore was disbursed to 42,46,831 borrowers, according to the data from the Finance Ministry. The scheme was launched in May last year to support Covid-hit MSMEs but was later extended till March 31, 2020, with the launch of ECLGS 2.0 that was expanded in scope. The amended version of the scheme focused on entities in 26 stressed sectors identified by the Kamath Committee including power, construction, iron and steel manufacturing, roads, real estate, textiles, chemicals, consumer durables, non-ferrous metals, pharma manufacturing, logistics, gems and jewellery, cement, auto components, hotels-restaurants-tourism, mining, plastic product manufacturing, automobiles manufacturing, auto dealership, aviation, sugar, port and port services, shipping, building materials, and corporate retail outlets, Thakur noted.
Accounts with credit outstanding of more than Rs 50 crore and up to Rs 500 crore as of February 29, 2020, are eligible to raise credit under ECLGS 2.0. The scheme also seeks borrower accounts to be less than or equal to 30 days past due as of February 29, 2020, that is, they should not have been classified as SMA 1, SMA 2, or NPA by any of the lenders as of February 29, 2020. SMAs are special mention accounts showing signs of incipient stress that lead to the borrower defaulting in servicing loan.
Budget 2021 had made a provision of Rs 15,700 crore to the MSME sector – more than double from Rs 7,572 crore in the preceding budget. Finance Minister Nirmala Sitharaman had also proposed a revision of the definition of small companies in the budget by enhancing thresholds for paid-up capital from Rs 50 lakh to Rs 2 crore and turnover from Rs 2 crore to Rs 20 crore. “This will benefit more than two lakh companies in easing their compliance requirements,” the minister said. “Provision of Rs 15,700 crores for MSME sector is welcome as this sector needs huge finance and policy support. Also, the announcement that faceless dispute resolution committee will be set up for smaller companies is very appreciable and commendable,” said Sanjay Bhatia, MD, Hindustan Tin Works, and Past President, FICCI CMSME told Financial Express Online.