Credit and Finance for MSMEs: 23 lakh MSMEs and other businesses were supported under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) during the financial year 2021-22, according to the data shared by Union Minister of State for Finance Bhagwat Karad in Lok Sabha on Monday. However, in its first financial year 2020-21, the scheme (launched in May 2020) had 95.41 lakh beneficiaries in terms of loans guaranteed, indicating maximum businesses impacted due to Covid sought support during FY21. Overall, 1,18,41,981 businesses were supported as of March 2022 with fully guaranteed collateral-free loans.
Karnataka was the top beneficiary state with 4.12 lakh businesses supported during FY22 followed by 2.49 lakh businesses from Rajasthan, 2.46 lakh borrowers from Tamil Nadu, 1.84 lakh from Bihar, and 1.76 lakh from Madhya Pradesh among top five states, data showed.
“The sharp fall in the number of beneficiaries in 2021-22 compared to 2020-21 could be due to three reasons, first, the emergency situation would have vanished; second, obtaining the fund may be difficult; and third, a considerable percentage (of promoters) would have got into alternative professions on their own. These reasons gain validity because the reduction in the number of beneficiaries has rather a uniform regional spread,” M H Bala Subrahmanya, Professor, Department of Management Studies at Indian Institute of Science, Bangalore told Financial Express Online.
Around 95.21 per cent of total ECLGS beneficiaries as of March 11 have been MSMEs, Karad had said during the Budget session earlier this year.
ECLGS has been applicable to existing credit borrowers constituted as proprietorships, partnerships, registered companies, trusts and limited liability partnerships (LLPs) and individual businesses apart from MSMEs. The credit guarantee is provided by National Credit Guarantee Trustee Company Limited (NCGTC), which operates the scheme, to member lending institutions including banks and non-banking financial companies with respect to the credit given to borrowers on their loan outstanding as of February 29, 2020.
As of April 30, 2022, Rs 3.32 lakh crore loans were sanctioned, of which Rs 2.54 lakh crore amount was disbursed, the Reserve Bank of India (RBI) had said in its latest Financial Stability Report earlier this month.
According to the report, private banks have shown a greater appetite than public banks in utilising different versions of ECLGSs. While private banks disbursed Rs 95,700 crore to fresh borrowers and Rs 34,600 crore to repeat borrowers, public banks disbursed Rs 79,800 crore to fresh borrowers and Rs 18,300 crore to repeat borrowers. NBFCs had disbursed Rs 20,800 crore to fresh borrowers and Rs 7,700 to repeat borrowers.
There have been multiple iterations of ECLGS viz., ECLGS 1.0, ECLGS 1.0 (Extension), ECLGS 2.0, ECLGS 2.0 (Extension), ECLGS 3.0, ECLGS 3.0 (Extension) and ECLGS 4.0 since its launch. The validity of ECLGS was extended to March 31, 2023, or till guarantees for an amount of Rs 5 lakh crore are issued.