Credit and Finance for MSMEs: MSME loan accounts restructured by public sector banks (PSBs) have jumped 58 per cent in nearly two years of the pandemic, according to the government data. From 6.19 lakh loan accounts involving Rs 22,650 crore restructured as of January 31, 2020, the number increased to 9.8 lakh accounts amounting to Rs 58,524 crore as of November 26, 2021. The data for January 2020 was shared by former Finance Ministry MoS Anurag Thakur in the Rajya Sabha in March 2020 and the latest information was shared by the current MoS Bhagwat Karad on Monday in reply to a written question.
Apart from MSME loans, “as per inputs received from PSBs, resolution plan/restructuring has been implemented in 8.5 lakh loan accounts of individual borrowers amounting to Rs 60,662 crore as of November 15, 2021,” the minister said.
While Karad stated that 9.8 lakh MSME loan accounts were structured as of November 26, 2021, but according to MSME Minister Narayan Rane, “13.06 lakh MSME loan accounts with an aggregate amount of Rs 55,333 crore have been restructured by public sector banks.” The data was shared by Rane in the Lok Sabha in July this year.
Importantly, the jump in restructured MSME accounts by PSBs from January last year till now might seem less significant when compared to a 23X increase from 26,190 MSME loans restructured during the January 2019 restructuring scheme by the Reserve Bank of India (RBI) to January 2020 levels, showed data from a Care Ratings report in July 2021 analysing RBI’s Financial Stability report published in July this year.
“The jump from January 2020 to November 2021 couldn’t be entirely due to Covid. The pandemic could be only one of the reasons as the growth from January 2019 to January 2020 was pretty high. In fact, this showed a decline in the growth rate of restructured accounts. Despite the restructuring scheme by RBI, if loans restructured since 2020 January are less in comparison to January 2019, then it means factors (not clearly known) that had played the role earlier would not have played the same role during 2020-21. There is also a possibility that schemes like ECLGS had helped MSMEs to avoid restructuring,” M H Bala Subrahmanya Professor – Department of Management Studies, Indian Institute of Science, Bangalore told Financial Express Online.
“The difference in restructured loan volume from January 2019 to January 2020 and then till November 2021 could also be due to schemes like ECLGS that had helped MSMEs avoid restructuring. Instead of opting for restructuring, MSMEs had looked at opting for ECLGS to get access to ready credit to stay alive for the next two to three years. Restructured accounts are treated as stressed. ECLGS helps you avoid that tag on your business,” a banker requesting anonymity told Financial Express Online.
Importantly, the RBI in June this year had doubled the loan restructuring limit for MSMEs, small businesses, and individuals for business purposes from Rs 25 crore to Rs 25 crore under Resolution Framework 2.0. On May 5, the central bank had announced the second round of restructuring of loans for those who hadn’t undertaken the same in the first round.
Under the ECLGS scheme, 64.4 per cent (Rs 2.90 lakh crore) of the total scheme limit of Rs 4.5 lakh crore, which was extended from Rs 3 lakh crore in June this year, was sanctioned so far. The information was shared by Prime Minister Narendra Modi at a virtual event late last month.