Credit and Finance for MSMEs: As of November 12, 2021, loans amounting to Rs 2.28 lakh crore were disbursed under the Emergency Credit Line Guarantee Scheme (ECLGS) to MSMEs and other businesses by banks, out of Rs 2.82 lakh crore loans sanctioned, as per data from the National Credit Guarantee Trustee Company (NCGTC) cited by the Reserve Bank of India (RBI) in its Financial Stability Report. NCGTC provides guarantee coverage to member lending institutions under the scheme. According to the break-up in terms of the guarantee amount and size of business, guarantees of value up to Rs 1 crore formed 51 per cent of the aggregate guarantees provided since the launch of the scheme on May 20, 2020.
Rs 1,33,955 crore guarantees were issued to 1.15 crore beneficiaries under less than Rs 1 crore bracket. These guarantees were dominated by micro enterprises. On the other hand, in Rs 1-5 crore bracket, 32,222 beneficiaries were issued guarantees worth Rs 66,598 crore with a share of 25.3 per cent in the guarantee amount. Further, 4,915 beneficiaries received guarantees amounting to Rs 55,781 in Rs 5-50 crore segment while only 86 beneficiaries had secured Rs 6,299 crore guarantee in Rs 50-500 crore segment.
Overall, in terms of the size of their businesses, 66 per cent of the ECLGS guarantees were issued to MSMEs wherein 1.02 crore micro units received guarantees worth Rs 65,771 crore followed by 4.98 lakh small enterprises that were given Rs 66,345 crore worth guarantee. Only 2.60 lakh medium enterprises were able to get guarantees worth Rs 42,041 crore.
ECLGS was originally devised for MSMEs, individual borrowers, and other business enterprises whose total fund-based credit outstanding across all lending institutions was up to Rs 25 crore. The scheme went through different iterations since launch namely 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. The validity of ECLGS is till March 31, 2022, or till guarantees for an amount of Rs 4.5 lakh crore are issued and disbursement under the scheme is permitted up to June 30, 2022.
Importantly, the drawdown under ECLGS 1.0 and 2.0 comprised over 96 per cent of the total guarantees issued. While 1.0 had a 77.24 share, the second iteration so far had 19.45 per share. ECLGS 3.0 and 4.0 launched in March and May this year had only 3.16 per cent and 0.15 per cent share respectively, indicating that beneficiaries under the third and fourth iterations are yet to be benefitted. ECLGS 3.0 was launched to cover enterprises in the hospitality, travel & tourism, leisure and sporting sectors while 4.0 was offered to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants following the second wave of the pandemic.
In terms of lenders, private banks (PVBs) showed greater proclivity than public sector banks (PSBs) for utilising the scheme, covering a larger number of beneficiaries. While public sectors banks had disbursed guarantees worth Rs 83,000 crore, private banks had disbursed Rs 1,06,000 crore in guarantees. Foreign banks and NBFCS had disbursed Rs 5,000 crore and Rs 31,000 crore in guarantees respectively.
However, RBI noted that stress is ‘visible’ among MSMEs even as the corporate sector has displayed resilience and bank credit growth is showing signs of a gradual recovery, led by the retail segment. “MSME portfolio of PSBs and PVBs indicates accumulation in NPA and special mention accounts (SMA)-2 categories in September 2021 relative to March 2021,” the report said. The NPA level for PSBs in September was 18.5 per cent in comparison to 16.8 per cent in March. While for PVBs, the NPA level declined from 3.6 per cent in March 2021 to 2.8 per cent in September, the SMA-2 level was up from 0.8 per cent to 2.1 per cent.