The Emergency Credit Line Guarantee Scheme (ECLGS) for micro, small, and medium enterprises (MSME), one of the federal government’s key planks in reviving financial exercise, has prevented 1.35 million MSME accounts from going below, in response to a report by State Bank of India launched on Thursday.
The scheme has saved round 15 million jobs and stopped 14 per cent of excellent MSME loans from turning into non-performing belongings (NPAs), stated the report authored by SBI’s Chief Economic Advisor Soumya Kanti Ghosh.
Since the launch of the scheme by Finance Minister Nirmala Sitharaman in May 2020, MSME mortgage accounts value Rs 1.8 trillion in absolute phrases have been saved from slipping into NPAs.
“According to our analysis, if these units had turned non-performing, then 15 million workers would have become unemployed. In effect, the scheme saved the livelihood for 60 million families (assuming four family members per worker including herself),” stated the report.
The report said that of the 1.35 million MSMEs accounts that have been saved because of scheme, nearly 93.7 per cent are within the micro and small class
According to SBI’s evaluation, the buying and selling sector, together with small kirana retailers, has benefitted essentially the most adopted by meals processing, textiles and industrial actual property. “Amongst the states, Gujarat has been the biggest beneficiary, followed by Maharashtra, Tamil Nadu, and Uttar Pradesh,” he stated.
Ghosh stated an older scheme, the Credit Guarantee Fund Trust for Micro and Small Enterprises, ought to be revamped utilizing the most effective practices from ECLGS, its scope and position ought to be expanded, and it ought to be administered on the road of the US Small Business Administration.
For his analysis on the affect of ECLGS, Ghosh advised Business Standard that his crew analysed the Special Mention Account (SMA) information for the banking system based mostly on developments in SBI portfolio to quantify the advantages derived from ECLGS in phrases of asset high quality.
SMAs are accounts exhibiting indicators of incipient stress ensuing within the borrower defaulting in well timed servicing of their debt obligations, although not but been categorized as NPA. Early recognition of such accounts allows banks to provoke well timed remedial actions to stop their potential slippages into NPAs.
“We applied a simple yet appropriate methodology in which we considered all such accounts whose status improved or remained in the same category in Nov 2021 as compared to September 2020,” he stated.
Ghosh stated the outcomes have been ‘startling’ going by the optimistic ramifications on a number of pivots, encouraging exploring feasibility of comparable construction to supply holistic help to MSME sector in anchoring the economic system.
“Of 1.35 million MSMEs accounts that are saved due to the ECLG scheme, 48 per cent belong to the micro category and nearly the same 46 per cent are the small borrowers. The remaining 6 per cent belong to the medium category,” he stated.
According to the report, in FY21, the monetary system disbursed loans value Rs 9.5 trillion to MSME sector, which is considerably increased than previous years of Rs 6.8 trillion in FY20. This sharp bounce in MSME lending in 2021 has been supported by the Atmanirbhar Bharat scheme of ECLGS.
“The ECLGS had a significant impact on credit flow to the micro segment within MSME. In 2020, MSMEs received higher credit compared to 2019, primarily due to the ECLG scheme. Incremental credit in 2020 (over 2019) was much higher than the credit provided in pre-pandemic times (2019 over 2018),” the report said.
“We recommend that the existing CGTMSE scheme for extending loans to the SME sector be relooked into totality and be reoriented by adopting the best practices from the current ECLG scheme,” it stated.