Slowdown in sanctioned loans to troubled companies, MSMEs

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ECLGS program is a key stimulus for businesses hit by lockdown restrictions due to COVID-19

There was some slowdown in sanctioned loans to distressed businesses and micro, small and medium enterprises (MSMEs) during October and November under the 3 lakh emergency credit guarantee program. crore announced by the government in May of this year.

During its first three months of operation, the Emergency Credit Lines Guarantee Scheme Fund (ECLGS) resulted in the sanctioning of concessional loans of 1.86 lakh crore, of which 1.32 lakh crore had been paid to 27.09 lakh borrowers on September 29.

Between September 29 and December 4, loans sanctioned under the program increased by just 19,094 crore to just over 2.05 crore lakh. These sanctions concern 80.93 lakh accounts.

Disbursements during this period increased by 26,380 crore, with over 13.4 lakh of additional borrowers, bringing the total amount disbursed under the program to nearly 1.59 lakh crore. The total of borrowers receiving funds under the program now stands at 40.49 lakh.

Key element

The ECLGS program is a key part of the government’s stimulus and support measures for businesses hit by lockdown restrictions put in place in March to curb the COVID-19 pandemic. It provides additional working capital financing for 20% of a borrower’s outstanding credit as of February 29, 2020. The financing takes the form of a term loan at concessional interest rates.

In November, the government announced the extension of the scheme to cover even larger companies operating in healthcare and the 26 most stressed sectors identified by the KV Kamath committee appointed by the central bank. Businesses with outstanding loans of 50 crore to 500 crore in sectors such as construction, real estate, textiles, electricity, cement, hospitality and tourism, are eligible for support.

NBFC Assistance

Likewise, the Partial Credit Guarantee Scheme 2.0 of 45,000 crore, intended to enable non-bank finance companies (NBFCs), housing finance companies and microfinance institutions to provide new loans to MSMEs and individuals, recorded a weak recovery between September 25 and December 4. .

The banks had approved the purchase of loan portfolios from these entities worth 25,505 crore and had purchased portfolios worth 16,401 crore as of September 25. Transactions under negotiation or pending approval at the time were around 3,171 crore at the time.

As of December 4, wallets approved for purchase stood at 27,794 crore, up just ₹ 2,289 crore. Portfolios at the negotiation / approval stage had also declined to 1,400 crore.

The latest figures, shared with Finance Minister Nirmala Sitharaman during a review meeting on the progress of various elements of the Atma Nirbhar Bharat package on December 11, did not include the extent of approved portfolios purchased since the last meeting. Minister’s review on the matter held on October 1.

The government has now extended until December 31 the deadline for banks to purchase bonds or commercial papers under this program.

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