ECLGS: Government extends emergency credit program until March 31 next year; this is what MSMEs want

Credit and Finance for MSMEs: As of September 24, 2021, over Rs. 2.86 lakh crore of loans have been sanctioned under the scheme, while of the total guarantees issued, around 95% were for sanctioned loans to MSMEs , the government announced on Wednesday.

Credit and financing for MSMEs: The Modi government’s flagship credit scheme for Covid-affected MSMEs and other Emergency Line of Credit Guarantee Schemes (ECLGS) has received its fifth extension since its launch last year. The Ministry of Finance on Wednesday extended the program for another six months until March 31, 2022, or up to guarantees for the overall ceiling of Rs 4.5 lakh crore is issued, whichever comes first. The program launched in May last year was extended from October last year to November and then to March 2021, followed by June and then September, with a subsequent extension of the scope also to include more sectors and of markets.

As of September 24, 2021, sanctioned loans had exceeded Rs 2.86 lakh crore under the ECLGS scheme, and of the total guarantees issued, around 95% were for sanctioned loans to MSMEs, the ministry said in its statement. The last disbursement date under the program has also been extended to June 30, 2022. The ministry added that by adding that Since its launch, the ECLGS has extended relief to over 1.15 crore MSMEs and enterprises. HHowever, the MSME ecosystem, this time with the extension, had sought to focus more on sectors experiencing slower recovery and/or those with high potential.

“I would like to suggest the extension must be until the amount is completed. 52 sectors have been identified which are almost wiped out with the second Covid attack and are mainly led by micro and small entrepreneurs. These sectors include salons, gymnasiums, cinemas, building contractors, sheet metal fabricators, paper fabricators, street vendors, automotive accessories, freight forwarders, exhibition and event management companies, etc Despite our numerous requests for easing eligibility instead of only Special Mention Accounts (SMA) 0, amount paid at 20% of sanctioned loan instead of outstanding loan, etc., the government did not never taken into account. There has been a total failure of the very purpose of the program to rescue MSMEs from the impact of Covidsaid KE Raghunathan, Head of Consortium of Indian Associations at Financial Express Online.

On Wednesday, the government also announced changes to the plan. First, existing borrowers under ECLGS 1.0 and 2.0 would be eligible for additional credit support of up to 10% of total outstanding credit as of February 29, 2020 or March 31, 2021, whichever is greater. Second, companies that have not applied for ECLGS can qualify for credit support of up to 30% of their outstanding credit as of March 31, 2021. Third, companies in the sectors specified in ECLGS 3.0, who have not made credit support up to 40% of their outstanding credit as of March 31 up to a maximum of Rs 200 crore per borrower.

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Importantly, the government has also stated that the additional credit can be used within these limits by existing ECLGS borrowers whose eligibility has increased due to the change in deadline to March 31, 2021, from February 29, 2020 As a result, borrowers who have received support under ECLGS and whose outstanding credit as of March 31, 2021 (excluding support under ECLGS) is greater than that as of February 29, 2020, will be eligible for incremental support within the ceiling. planned under ECLGS 1.0, 2.0 or 3.0.

“The main focus should have been on businesses involved in travel and tourism, including tour operators. Restaurants should have been particularly important because if the recovery is there, they generate a huge amount of business and revenue. jobs. Throughout its supply chain, a lot of people are involved apart from a very large number of delivery people in the last mile network. There are many that are still closed and have not been able to pay rent or repay the loans. So something for them should have been there to increase their speed of recovery,” Anil Bhardwaj, secretary general of the Federation of Indian Micro, Small and Medium Enterprises (FISME) told Financial Express Online.

All India Association of Industries, which according to its website has over 1,500 members and through its affiliates represents more than 50,000 SMEs across India, was among the MSME bodies that had recently petitioned the government for a further extension of the ECLGS until at least March next year to help revive certain key sectors.

In view of the current situation in China, where certain steel, textile and aluminum industries have closed there, the continuation of the ECLGS program is very important. There is hope among MSMEs for a recovery in demand in the market and as a result they were looking for an extension of the program whereas previously there may have been a lack of interest among them due of lack of demand. Engineering, pharmaceuticals, textiles and automotive components should have been targeted more. The mechanical industry has suffered from weak demand, while the automotive sector needs more attention to improve production. Small textile units, which are complementary to larger units, need to be supported as some pharmaceutical units struggle to recover even as healthcare has been one of the main sectors to benefit from the pandemic,” said said Vijay Kalantri, chairman of AIAI, to Financial Express Online.

“If there had been a lack of interest among MSMEs in this program or if there had been no takers, then the government would have realized that even if we extend the program, nothing would happen. However, the government has expanded the program with emphasis on different fields and sectors because the demand was there,” a banker told Financial Express Online, requesting anonymity.

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