NEW DELHI: The government is likely to extend the emergency credit line guarantee scheme (ECLGS) for micro, small and medium enterprises (MSME) by another one year till March 2024, according to sources in the know.
The announcement will be made by finance minister Nirmala Sitharaman in the Union Budget to be presented on February 1, the government sources said. “The government may extend ECLGS by one more year, so that the unutilised amount can be used by MSMEs that need the credit. The minister may announce the extension while presenting Union Budget 2023-24,” the source said.
Under ECLGS, Rs 5 lakh crore worth of credit to the MSME sector will be covered by government guarantee. According to the Reserve Bank of India’s (RBI) financial stability report, under the ECLGS, an amount of Rs 2.82 lakh crore has been disbursed till September 30, 2022, of which scheduled commercial banks have disbursed Rs 2.46 lakh crore, with predominant share of disbursals under the phase 1 of ECLGS.
The major sectors availing of the ECLGS were services and traders, which were among the most impacted by the pandemic. As per the report, private sector banks (PVBs) utilised the ECLGS more than public sector banks, with the amount disbursed to repeat borrowers of PVBs almost double that of PSBs.
The scheme was first time launched in March 2020 as part of the Aatma Nirbhar Bharat package to help MSMEs in combating the financial distress caused by Covid pandemic. The ministry has ever since expanded the scope of this scheme, and had extended it till March 2023. Under the scheme, the government guarantees 100% of the loans given to MSMEs in case loan becomes NPA.
Meanwhile, the Federation of Indian Micro and Small and Medium Enterprises(FISME), in its pre-Budget recommendations to the ministry has urged for speedy implementation of Budget decision (2022-23), allowing use of surety bonds in place of bank guarantees in government procurements. The decision was made to reduce indirect cost for suppliers and work contractors.
Disbursements under ECLGS
- As per RBI report, an amount of G2.82 lakh crore has been disbursed under ECLGS till September 30, 2022,
- Scheduled commercial banks have disbursed G2.46 lakh crore
- Major sectors availing ECLGS were services and traders impacted by the pandemic
- As per the report, private sector banks (PVB) utilised ECLGS more than public sector banks
- Amount disbursed to repeat borrowers of PVBs almost double that of PSBs