Credit and Finance for MSMEs: Even as the Rs 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS), which has been extended till June 30, 2021, will alleviate quick-term discomfort for the sector but it may possibly improve banks’ exposure to stressed MSME loans amid the second wave of the Covid pandemic, according to rating agency Fitch Ratings. “Extension of the MSME refinancing scheme until 30 June 2021 will alleviate short-term pain, but potentially add to the sector’s exposure to stressed MSMEs, which was around 8.5% of loans (9MFY21) as per Fitch’s estimate,” the agency stated in a statement. Earlier this month, the government had announced ECLGS 3. to extend the scheme’s scope to cover enterprises in hospitality, travel & tourism, leisure & sporting sectors. The ECLGS scheme was final year extended from October 2020 to March 2021.
Under ECLGS, member lending institutions (MLIs) which includes public and private sector banks and non-banking monetary businesses (NBFCs) beneath the scheme had currently sanctioned 82 per cent or Rs 2.46 lakh crore of Rs 3 lakh crore as of February 28, 2021, MSME Minister Nitin Gadkari had stated in a written reply to a query in the Rajya Sabha final month citing information from the National Credit Guarantee Trustee Company (NCGTC) – the implementing agency of the ECLGS scheme.
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The government had also announced the Rs 20,000-crore subordinate debt scheme for stressed MSMEs final year beneath the Covid stimulus package. As of March 3, 2021, 332 guarantees worth Rs 38.5 crore had been authorized because its launch in June 2020 and operationalized in August. The scheme intended to advantage 2 lakh MSMEs that are non-performing assets (NPAs) or stressed. According to the 12th round of bankers’ survey by FICCI-IBA among July and December 2020, 84 per cent respondents anticipated an raise in NPAs in the MSME sector for the duration of the initially six months of 2021.
Fitch added that when there are asset top quality issues for banks because their monetary outcomes are however to completely issue in the initially Covid wave’s effect and the stringent 2020 lockdown, “we consider the MSME and retail loans to be most at risk.” MSMEs, even so, had benefited from state-assured refinancing schemes that prevented stressed exposures from souring. Meanwhile, bank credit development to micro and tiny enterprises (MSEs) was up 6.4 per cent to Rs 11.48 lakh crore in January 2021 from Rs 10.79 lakh crore in January 2020, according to the March 2021 bulletin of the Reserve Bank of India. However, the January YoY development contracted marginally by .2 per cent from 6.6 per cent December YoY development. MSEs had a 12.09 per cent share in the all round Rs 94.97 lakh crore gross bank credit deployed in January 2021, down from 12.11 per cent in December 2020.