ECLGS Continues to Catalyze Revival of MSMEs across India
Mumbai,August 30th , 2022 –The Emergency Credit Line Guarantee Scheme (ECLGS) has been successful in helping Indian businesses navigate through the economic crisis caused by COVID-19, and catalyzed the revival of MSMEs during and after the pandemic. That’s according to the second edition of the ongoing TransUnion CIBILstudy on the flow of credit and changes in borrower behavior and performancebased on ECLGS disbursals made up to 31March2022.
The TransUnion CIBIL study is based on ECLGS data provided by National Credit Guarantee Trustee Company Ltd (NCGTC).The ECLGS scheme was launched in May 2020 under the Atmanirbhar Bharat Abhiyan, and has been expanded and extended until 31 March 2023 with an outlay of INR 5 lakh crore. This includes the recent addition of a further INR 50,000 crore, which will be made availableto enterprises in hospitality and related sectors.
Scheme has catalyzed sustainable resurgence across MSME** segments
The study highlights that additional liquidity through the ECLGS not only enabled MSMEs to revive their business during the initial phase of COVID-19, but also to scale their enterprises as economic activity started returning to normal. Over the course of the four quarters since availing ECLGS, the average number of new trades opened per borrower went up by 15% compared to only 6% for the eligible borrowers who didn’t avail ECLGS. Additionally, the ECLGS has significantly helped revive contact intensive-, mobility-, and consumption-dependent sectors like services, traders, and construction, along with labor intensive industries like textile and food processing.
Speaking on the findings of the second edition of this study, the MD and CEO of TransUnion CIBIL, Mr. Rajesh Kumar, said, “The liquidity shortage created post the pandemic, due to paucity of inflows while at the same time continuation of obligatory outflows, could have posed possible threat of insolvency for businesses. The timely infusion provided through ECLGS has significantly helped in resurgence of businesses across geographies and at the same helped in controlling NPAs in MSME lending. The NPA rate of 4.8% for borrowers who availed ECLGS facility is lower than that of the borrowers who were eligible but did not avail the facility (6.1%)”.
Another crucial study finding is that borrowers who availed ECLGS have exhibited good repayment behavior. The study showed that repayment commenced in 38% of the accounts within three months from availing the facility, and went up to 82% in a year. The repayment rate has improved in the case of borrowers who availed ECLGS compared to overall repayment trendsin the MSME market (excluding ECLGS borrowers).
