Credit and Financing for SMEs: ECLGS is devised for SMEs, individual borrowers and other business ventures whose total fund-based credit outstanding with all lending institutions as of 29 February 2020 was Rs 50 crore.

Credit and financing for SMEs: The number of guaranteed loans or guarantees issued to SMEs under the government’s flagship post-corona crisis small business Emergency Credit Line Guarantee Scheme (ECLGS) as of February 28 of the current fiscal year was 76 percent down from last year, according to government data. Launched in May 2020, the number of guarantees issued during the FY21 period of May-March was 90.39 lakh related to Rs 1.56 lakh crore while in the current year the total number of guarantees issued was 21.60 lakh , which amounts to Rs 54,604 crore.

The data from the National Credit Guarantee Trustee Company, which provides guarantee coverage under ECLGS, was shared by Finance Minister Bhagwat Karad in a written response to a question in Lok Sabha during Parliament’s ongoing budget session.

“Optimistically, it indicates that MSMEs, who received guarantees under the 1.0 and 2.0 versions of the scheme during FY21, recorded a significant recovery in the business. The number of guarantees was high in FY21 as SMEs in all sectors needed support. However, when the government launched 3.0 and 4.0 iterations of the scheme in FY22 to specifically target the hospitality and healthcare sectors that need additional support, the number of guarantees dropped automatically,” Ashok Saigal, MD, Frontier Technologies and Co-Chairman , CII The National MSME Council told Financial Express Online.

The government had raised the limit of the scheme from Rs 3 lakh crore to Rs 5 lakh crore to focus on these sectors as most eligible borrowers outside these sectors may have already benefited from it, Saigal added.

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Data showed that micro-enterprises dominated the guarantees provided in both financial years. In FY21, guarantees of 83 lakh were issued to micro-units as compared to guarantees of 4.47 lakh to small companies and guarantees of 2.57 lakh to medium-sized companies. Similarly, 20.72 lakh guarantees were issued to micro-units during the 11-month period of FY22 versus 80,194 to small businesses and 7,810 to medium-sized units.

ECLGS has been developed for SMEs, individual borrowers and other business ventures whose total outstanding credit based on funds with all credit institutions on 29 February 2020 was Rs 50 crore. The 2.0 version was launched in November 2020 to cater to the 26 sectors identified by the Kamath Committee and also healthcare. In March 2021, the 3.0 version was announced for SMEs and other companies in the hospitality, travel & tourism, leisure & sports sectors. The latest 4.0 version was launched in May 2021 in response to the second wave of the pandemic to support hospitals, nursing homes, clinics and medical colleges in setting up on-site oxygen generating facilities.

This post ECLGS: Guarantees issued to MSMEs until the end of February in FY22 have fallen sharply from FY21, government data shows

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