Credit and Finance for MSMEs: Nearly half of the loans disbursed beneath the federal government’s Emergency Credit Line Guarantee Scheme (ECLGS) to MSMEs had been used to clear the dues of distributors offering uncooked supplies whereas one-third of loans had been used to restart companies, and the remaining quantity was used for fee of salaries and to satisfy different bills, mentioned the Reserve Bank of India’s (RBI) annual report for the monetary 12 months 2021-22. ECLGS is the flagship post-Covid credit score scheme for current MSME debtors launched in May 2020 as a part of the Rs 20-lakh-crore particular financial Atmanibhar Bharat bundle.
Following the ECLGS announcement, MSME mortgage demand elevated sharply, significantly credit score disbursements to small enterprises with mortgage sizes of lower than Rs 10 lakh in the course of the second quarter of FY21. According to the info shared within the report, 45 per cent of those loans had been used to clear current vendor dues adopted by round 28 per cent to renew business operations, roughly 13 per cent in direction of worker salaries and the remainder round 13 per cent in direction of different bills.
However, to help new debtors as effectively impacted because of the Covid pandemic, the central financial institution in February 2021 had introduced a deduction of loans given to new debtors within the MSME sector from the money reserve ratio (CRR) maintained by banks. “This measure increased the availability of loanable funds to new MSME sector borrowers, as loans to new borrowers grew almost at the same pace as for existing borrowers,” the report famous.
This exemption was obtainable for exposures as much as Rs 25 lakh per borrower for credit score prolonged as much as the fortnight ending October 1, 2021, for a interval of 1 12 months from the date of origination of the mortgage or the tenure of the mortgage, whichever is earlier, an announcement by RBI in February had mentioned.
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Moreover, ECLGS additionally helped within the restoration of pressured belongings. Out of about 15 lakh ECLGS accounts, 88 per cent had been customary belongings, 10 per cent had been particular point out accounts (SMAs), and a couple of per cent had been non-performing belongings (NPAs), the annual report mentioned. Out of complete NPAs, the transition from NPAs to straightforward belongings was considerably larger in ECLGS accounts than non-ECLGS accounts of the identical debtors throughout 2021-22.
Based on the info shared by RBI within the annual report, 37 per cent ECLGS accounts transitioned from NPA to straightforward class compared to 14 per cent non-ECLGS NPA accounts that switched to straightforward class. Likewise, the share of NPAs evolving to SMA accounts was larger at 35 per cent for ECLGS accounts vis-a-vis 16 per cent for non-ECLGS accounts whereas when it comes to accounts, which remained NPAs, 70 per cent belong to non-ECLGS class compared to 29 per cent ECLGS accounts.
Source: www.financialexpress.com”