Emergency Credit Line Guarantee Scheme Benefited More Than 95% MSMEs

According to the National Credit Guarantee Trustee Company Limited, the agency in charge of the Emergency Credit Line Guarantee Scheme (ECLGS), as of 11.3.2022, a total of 117.87 lakh businesses had received 100% guaranteed collateral-free loans through the ECLGS, with approximately0. 95.21 percent of them being MSMEs. Dr Bhagwat Kisanrao Karad, Union Minister of State for Finance, stated this in a written reply to a question in Rajya Sabha today.

According to the Minister, the ECLGS was launched in May 2020 as part of the Aatmanirbhar Bharat Abhiyaan to assist eligible Micro, Small and Medium Enterprises (MSMEs) and other eligible business enterprises in meeting their operational liabilities and restarting their businesses in the aftermath of the COVID-19 pandemic. It covered every aspect of the economy. The Minister also stated that Member Lending Institutions (MLIs) receive a 100 percent guarantee on credit facilities extended to eligible borrowers under the scheme.

The Minister also stated that, in response to the Finance Minister‘s announcement in her speech on the Union Budget 2022-23 that ECLGS would be extended until March 2023, the government has extended the scheme by one year, until 31.3.2023.

More specifically, the Minister stated that the scheme’s structure allows for easy access to credit because lenders offer pre-approved loans based on the borrower’s existing credit outstanding, and there is no new appraisal undertaken by lenders because additional credit is sanctioned in addition to the credit facilities already assessed. Furthermore, the interest rate is capped in order to reduce the cost of credit, and loans are sanctioned without any processing, prepayment, or guarantee fees.

In response to a question about the RBI’s views on the MSME sector, the Minister stated that the RBI noted in its Financial Stability Report for December 2021 that MSMEs are showing signs of stress. In this regard, the RBI has informed that commercial banks’ MSME portfolios show accumulation in the non-performing asset and special mention account – 2 categories in September 2021, compared to March 2021.