Only half of eligible MSMEs able to tap the emergency credit line

Mumbai: Only half of the targeted micro, small and medium enterprises have benefited from the government’s Emergency Credit Line Guarantee Scheme even though banks and non-banks have asked for the scheme to be broadened.

Of the 4.5 million MSMEs eligible for relief under the scheme launched after the Covid-19 outbreak, only 2.4 million, or 53 per cent, have secured loans, according to data collated by financial intelligence provider Crediwatch. There are 64 million MSMEs in India, 99 per cent of which belong to the micro-sector.

Loans approved under ECLGS stood at Rs 1.61 lakh crore, or 54 per cent of the targeted amount of Rs 3 lakh crore, as of September 3. The amount disbursed was Rs 1.13 lakh crore.

“The hurdle is on the supply side. The number of companies that qualify to avail of the benefit under ECLGS are only those that had access to institutional credit, which is merely 5-10 per cent of the SMEs. Also, the extent of loan that can be granted is capped at 20 per cent of outstanding till February 29,” said Meghna Suryakumar, founder of Crediwatch.

Additionally, even with the sovereign guarantee and low borrowing costs, MSMEs are adopting a cautious approach and waiting for demand to revive before taking loans, Suryakumar said.

Banks and non-banking financial companies wrote to finance minister Nirmala Sitharaman in July, requesting the inclusion of loans to individuals under the government-sponsored scheme. They said more than two-thirds of the loans advanced to tiny and small enterprises were taken by individuals and not corporate entities.

In August, the Finance Industry Development Council, a grouping of NBFCs, wrote to the chief of the National Credit Guarantee Trustee Corporation and sought a relaxation in norms that require borrowers to furnish their permanent account numbers or audited books to get credit. It said the majority of their small- and medium-sized customers do not file income-tax returns or maintain formal accounts. However, the scheme continues to restrict a large portion of MSMEs from availing of relief.

“The ECLGS caters to the top 3 per cent of MSME population as per its original design and these 3 per cent of borrowers perhaps contribute to 40 per cent of ECLGS disbursements,” said Manish Jaiswal, CEO of Magma Housing Finance. “The coverage of the scheme from here will need to make it more expansive and include retail, individual borrowers who have borrowed for business in their individual or personal names.”

On May 21, the Cabinet approved funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent for MSMEs through ECLGS.

Only half of eligible MSMEs able to tap the emergency credit line Only half of eligible MSMEs able to tap the emergency credit line Reviewed by TechCO on 9/27/2020 Rating: 5

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