Credit and finance for MSMEs: The extension of the government’s post-Covid credit scheme for MSMEs Emergency Credit Line Guarantee Scheme (ECLGS) till March 31 2023 is expected to keep the credit appetite of MSMEs robust, said Finance Ministry in its Monthly Economic Review for September 2022. The finance minister Nirmala Sitharaman in this year’s budget had extended ECLGS till the end of the current fiscal from March 2022 and also increased the guarantee cover by Rs 50,000 crore to take the total limit of the scheme to Rs 5 lakh crore from Rs 4.5 lakh earlier. 

As of August 5, 2022, loans of about Rs 3.67 lakh crore were sanctioned under the scheme, according to the government’s data. Moreover, the monthly review noted that the credit offtake by MSMEs, which was subdued until the second quarter of the financial year 2020-21 due to Covid, increased substantially post ECLGS introduction. The credit outstanding to the MSME sector grew by 63.8 per cent between September 2020 and August 2022, the ministry said.

According to the data from the Reserve Bank of India’s (RBI) October bulletin, bank credit to MSMEs increased 24 per cent to Rs 18.15 lakh crore in August this year from Rs 14.64 lakh crore in August 2021. In July Rs 18.08 lakh crore was deployed. 

“Within the industry segment, growth in credit to MSME was higher, in part assisted by the benefits accruing from the ECLGS Scheme. As per the National Credit Guarantee Trustee Company Ltd. (NCGTCL), the agency which operates the ECLGS, as on March 11, 2022, 117.9 lakh businesses were supported by the scheme, of which 95.2 per cent were MSMEs,” the ministry added. 

Importantly, the finance ministry had recently enhanced the ECLGS loan amount eligibility for cash-starved domestic airlines by nearly four times – from earlier Rs 400 crore to Rs 1,500 crore. Originally focused on small businesses including self-employed professionals across multiple sectors, ECLGS was expanded in scope in its third revised version in March this year to cover airlines also in the civil aviation sector. 

The lending potential to MSMEs is expected to be around Rs 3 trillion next year based on GST Invoices and bank statements made available on account aggregator and banks adopting OCEN (Open Credit Enablement Network), V. Anantha Nageswaran, the Chief Economic Advisor to the Government of India had said at the Global Fintech Festival (GFF) in Mumbai in September.

Source : https://www.financialexpress.com/industry/sme/msme-fin-msme-credit-appetite-likely-to-be-robust-with-eclgs-extension-till-march-2023-finance-ministry/2743908/