Banks and Non-Banks Demand Broadening of the Government’s Emergency Credit Line Guarantee Scheme (ECLGS)

Only 53% of the targeted MSMEs receive loans. Banks and non-banking institutions demand broadening of the government’s Emergency Credit Line Guarantee Scheme (ECLGS) as only half of eligible MSMEs benefit.

Half of Eligible MSMEs Benefit from ECLGS

According to data collected by Crediwatch, only 2.4 million out of 4.5 million eligible MSMEs secured loans through the ECLGS. The government launched the scheme as a part of the 20 lakh crore package to provide relief to distressed MSMEs amid the pandemic. The government approved a fund of Rs 3 lakh crore at a concessional rate of 9.25% for MSMEs through ECLGS.

SMEs Cautious of Taking Loans

Meghna Suryakumar, the founder of Crediwatch, said that Rs 1.61 lakh crore, 54% of targeted Rs 3 lakh crore had been approved as of September 3. The disbursed amount stands at Rs 1.13 lakh crore. She mentioned that problem lies on the supply side as the loan to be granted under ECLGS will be capped at 20% of outstanding till February 29. Besides, despite such low-cost offerings and sovereign guarantee, SMEs are cautious in borrowing and waiting for demand to revive.

Include Individuals in the Scheme- Banking and Non-Banking Institutions

Several banks and non-banking institutions requested the finance ministry to include loans to individuals under the government-sponsored ECLGS. Further, they added that individuals took two-thirds of the loans advanced to tiny and small enterprises. Besides, the Finance Industry Development Council, a grouping of NBFCs asked the chief of the National Credit Guarantee Trustee Corporation to relax norms concerning permanent account numbers as the majority of their customers do not maintain formal accounts. 

The government launched this collateral-free scheme to aid businesses in meeting their expenses and resuming operations amid the coronavirus pandemic. However, it the expanded the plan includes individual loans for working capital purposes and larger MSMEs. The finance ministry’s tweet confirmed that PSBs and private banks have sanctioned Rs 1,77,353 crore to individual sand MSMEs. Further, state-owned lending has increased to Rs 79,347.73 crore 

In all, the statistics reveal that only a small number of MSMEs have benefitted from the scheme. Hence, lending institutions want the government to make the scheme more expansive.

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