Incentives provided by the Emergency Credit Line Guarantee Scheme (ECLGS) has helped in boosting credit flow to MSMEs, with at least 14.6 lakh MSME (micro, small and medium enterprise) accounts being saved due to the scheme, according to an analysis by State Bank of India’s economic research department .

In absolute terms, MSME loan accounts worth ₹2.2 lakh crore improved since inception of ECLGS for the entire banking industry, per the ERD’s analysis.

“This means that around 12 per cent of the outstanding MSME credit has been saved from slipping into NPA (non-performing asset) because of the ECLG scheme,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said.

Outstanding loans to MSMEs increased from ₹16 lakh crore in FY20 to ₹18 lakh crore in FY21 and ₹20 lakh crore in FY22, according to the report.

Related Stories
Govt may not announce capital infusion for PSU banks in Budget 2023-24
Public sector banks’ capital adequacy ratio is much above the regulatory requirement and varies between 14-20 per cent

The government-backed scheme, which has been much more successful (vis-a-vis the Credit Guarantee Fund Trust for Micro and Small Enterprises/ CGTMSE) in assuaging hardships to the MSME sector, has saved the livelihoods of about 6.6 crore people (assuming four family members per worker including herself/himself), the report said.

ECLGS was launched by the government in view of Covid-19 crisis. It provides 100 per cent guarantee to banks and NBFCs to enable them to extend emergency credit facilities to MSMEs/ Business Enterprises (with outstanding loan up to ₹50 crore as on February 29, 2020, and turnover up to ₹250 crore in FY20) to meet their additional term loan/ working capital requirements.

The report noted that there is a clear evidence that the MSME units are becoming larger with several units crossing the threshold of ₹250 crore turnover and turning mid sized corporates by the new definition of MSME units.

This reveals integration of MSME units with larger value chain as PLI (production-linked incentive) activity is getting momentum, it added.

“Interestingly, the data indicate that all the SME units are becoming larger with the rise in economic activity. This will increase the ability of MSME units to raise capital through (non-bank) debt markets.

“Only 410 companies have been listed on the BSE SME platform but nearly 40 per cent of them have moved up to mainstream platform, indicating capital market listing helps in gaining further scale much quickly,” Ghosh said

Referring to Udyam Assist Platform (UAP), the report estimated that the platform would benefit up to 5 crore informal micro enterprises (IMEs). UAP has been developed by SIBDI to enable IMEs that aren’t registered under GST to get a registration certificate from the government based on the information available with banks/NBFCs.

Related Stories
Paytm, Citi end tie-up for co-branded credit card ahead of Citi merger
Ahead of the merger of Citibank’s consumer banking business with Axis Bank

“States like West Bengal, Uttar Pradesh, Tamil Nadu, Karnataka and Andhra Pradesh could benefit with 2.6 crore registrations of IMEs,” the report added.

Nudging IMEs into the ambit of formalisation will result in smaller firms that are mostly self-employed to get registered, which in turn boost employment, ensure credit expansion and lay forth architecture for formal credit mechanism, Ghosh said.

With the change in MSME definition in 2020, the government mandated all the MSMEs to register under the Udyam portal. The number of GST registration in India is about 1.40 crore whereas the current MSME units registered under Udyam Certification is about 1.33 crore