One in 6 MSME loan accounts under Govt pandemic relief package turns NPA

By Shankar Krishnan --
Friday, 09 Sep, 2022

About the Emergency Credit Line Guarantee Scheme (ECLGS)

Under ECLGS, which is for helping companies tide over liquidity crunch resulting from Covid-19 curbs, banks provide additional loans to existing borrowers without asking for extra collateral. To encourage banks, these loans are fully guaranteed by the government against credit losses. This scheme will be key to ensure that MSMEs impacted by intermittent lockdowns in states get funding to stay afloat.

Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans. Companies from hospitality, travel and tourism as well as leisure and sporting sectors are expected to benefit from the relaxation in the scheme. Hotels, restaurants, canteens, caterers, marriage halls, tour operators, as well as amusement parks and theatres can avail the facility.

In an indication of the continuing distress in the Micro, Small and Medium Enterprises (MSME) sector, one in every six loans disbursed under the Emergency Credit Line Guarantee Scheme (ECLGS) launched as part of the Covid-19 relief package in May 2020 has turned bad in just 27 months, according to information obtained by The Indian Express under the Right to Information Act. The defaults are mainly in the lower end of the loan bands (up to Rs 20 lakh), the data reveals.

Source: Indian Express

One in 6 MSME loan accounts under Govt pandemic relief package turns NPA. <big>About the Emergency Credit Line Guarantee Scheme (ECLGS)</big>

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<big>Under ECLGS, which is for helping companies tide over liquidity crunch resulting from Covid-19 curbs, banks provide additional loans to existing borrowers without asking for extra collateral. To encourage banks, these loans are fully guaranteed by the government against credit losses. This scheme will be key to ensure that MSMEs impacted by intermittent lockdowns in states get funding to stay afloat.</big>

<big>Sanctions and disbursements under the facility are relatively faster since lenders have the Central government guarantee in case of default against these loans. Companies from hospitality, travel and tourism as well as leisure and sporting sectors are expected to benefit from the relaxation in the scheme. Hotels, restaurants, canteens, caterers, marriage halls, tour operators, as well as amusement parks and theatres can avail the facility.</big>

<big>In an indication of the continuing distress in the Micro, Small and Medium Enterprises (MSME) sector, one in every six loans disbursed under the Emergency Credit Line Guarantee Scheme (ECLGS) launched as part of the Covid-19 relief package in May 2020 has turned bad in just 27 months, according to information obtained by The Indian Express under the Right to Information Act. The defaults are mainly in the lower end of the loan bands (up to Rs 20 lakh), the data reveals.</big>

Source: Indian Express