The government is looking to extend the Emergency Credit Line Guarantee Scheme (ECLGS), meant primarily for MSMEs. The scheme that was started during the pandemic could be extended by another six months, finance ministry officials said.
At a recent meeting with bank heads, ministry officials said the MSME sector was still struggling and needed support and handholding. MSME exporters were grappling with a slowdown in global demand.
ECLGS has supported 1.13 crore borrowers involving Rs 2.39 lakh crore worth of guarantee as of January 31, 2023, of which 1.10 crore borrowers (97.6 per cent) were micro and small enterprises, according to government data.
In the budget, the government announced an infusion of Rs 9,000 crore in the Credit Guarantee Fund Trust for MSMEs to enable an additional collateral-free guarantee of Rs 2 lakh crore.
But one in every loan — or 16.9 per cent of the accounts — raised under the scheme has turned into a non-performing asset at the end of September, the RBI said.
“The September 2022 position of the ECLGS lending indicates that distress continues in the MSME sector,” it said.
“There is no point in simply extending, again and again, a scheme that doesn’t take care of the needy,” said K.E. Raghunathan, national chairman of the Association of Indian Entrepreneurs.
“What is required is not an extension but a new scheme to help those who are not eligible under ECGLS before, offering a one-time-settlement to those MSMEs who want to close their business and restart again and support to SMA 1 and SMA 2 accounts (special mention accounts) as on date with breathing time to survive,” he said.