MSMEs’ Credit Offtake Zooms on ECLGS Line of Support

Offtake of credit from scheduled commercial banks to medium, micro and small industrial enterprises has zoomed in recent months on the back of the government’s emergency credit line guarantee scheme (ECLGS), the Centre for Monitoring Indian Economy said. “The take-off is sudden, and it is relatively big, and the only set of enterprises to see an increase in bank loans are medium, micro and small enterprises,” CMIE said in its weekly analysis.

According to CMIE, these enterprises have largely, or possibly almost entirely, benefited from the central government’s ECLGS launched in November 2020.

ECLGS loans are top-up loans to help existing business enterprises overcome their difficulties arising out of lockdowns and other pandemic related ill-effects. The scope of the scheme was enhanced thrice in November 2020, March 2021 and May 2021. Till November 2021, Rs. 2.9 lakh crore was sanctioned under the scheme.

Citing the RBI data, CMIE said the net increase in outstanding bank lending to medium, micro and small enterprises between April 2020 and November 2021 was Rs. 1.37 lakh crore.

“It seems that the ECLGS was effective in arresting any major financial stress in the operations of the MSME sector. But what explains the sharp pick-up in loans to the medium, micro and small enterprises in 2021-22 is that these loans are 100% guaranteed by the central government and there is no processing fee,” CMIE added. S-ET

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