Credit and finance for MSMEs: One-sixth (one in every six loans) or 16.9 per cent of total loan accounts, which raised credit under the Emergency Credit Line Guarantee Scheme (ECLGS), have turned non-performing assets (NPAs) as of September 2022, said the Reserve Bank of India (RBI) in its December 2022 Financial Stability Report. “The September 2022 position of the ECLGS lending indicates that distress continues in the MSME sector,” the report said.
As of September 2022, Rs 2.82 lakh crore were disbursed by banks and other lenders in around 1.04 crore loan accounts of MSMEs and other businesses under ECLGS, according to the report’s data. This indicated that roughly 17.72 lakh accounts (one-sixth of around 1.04 crore accounts) slipped into the NPA category as of September 2022.
Unit-type wise NPA
“If one-sixth of the accounts, which were normal as of February 28, 2020, have gone bad, think of those accounts which were SMA (special mention accounts) 2,3 and NPA before that due to demonetisation, GST and economy slowdown. In our opinion, the total of such accounts, which have gone bad in the last 36 months, would have crossed more than 35 per cent but we have no data except seeing the reality on the ground which we don’t want to accept,” KE Raghunathan, National Chairman, Association of Indian Entrepreneurs told FE Aspire.
Also read: ECLGS: 57% of Rs 5 lakh cr disbursed till Nov; NPAs at 3.89%
On the other hand, in terms of the amount, 4.5 per cent of the credit raised turned non-performing as of September 2022 with a 43 per cent share of micro units, 25 per cent of small units, 10 per cent of medium enterprises, and 22 per cent of other business enterprises that secured credit under ECLGS.
Even though micro enterprises segment availed a quarter of loans disbursed under the ECLGS, their share in overall NPAs stood much higher at 93.5 per cent in comparison to 3.2 per cent share of other business enterprises, 2.8 of small enterprises, and 0.5 per cent of medium units.
Moreover, services and trade businesses, which formed one-third of the ECLGS disbursements, remain stressed with little more than half of the total delinquency under the ECLGS, the report noted. While services businesses had a share of 28 per cent in total NPAs, traders had a share of 23 per cent. Textiles and food processing segments had NPA share of 5 per cent and 6 per cent respectively and other industries had a share of 11 per cent.
ECLGS was launched in May 2020 as part of Aatmanirbhar Bharat Abhiyaan to support eligible MSMEs and other businesses in recovering post-Covid. Banks were provided with a complete credit guarantee for loans given by them under the scheme to eligible MSMEs. The admissible guarantee limit under the scheme was increased from Rs 4.5 lakh crore to Rs 5 lakh crore earlier last year, with the additional guarantee cover of Rs 50,000 crore earmarked exclusively for the hospitality and related enterprises including the civil aviation sector.