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 have 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.
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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 livelihood of about 6.6 crores people, the report said.
ECLGS was launched by the government in view of the Covid-19 crisis. It provides a 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.
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 obtain a registration certificate from the government based on the information available with banks/NBFCs.
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“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 ambient of formalization 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