The meeting, which will be chaired by Financial Services Secretary Vivek Joshi, would also see the participation of major private sector lenders HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank.
The extension of the ECLGS and LGSCAS beyond March 31 and the related challenges would be deliberate.
The ECLGS was announced as part of the Atmanirbhar Bharat package in May 2020 with the aim of helping businesses, including MSMEs, to meet their operational obligations and resume their activities in view of the distress caused by the COVID-19 crisis, by providing banks with a 100% guarantee. against any loss suffered by them due to the non-repayment of the financing by the borrowers.
The aggregate cap initially announced for the ECLGS was Rs 3 lakh crore, which was later increased to Rs 4.5 lakh crore.
Subsequently, the Union Budget 2022-23 announced the extension of the validity of the scheme until March 2023 and the increase of the guaranteed cover limit of the ECLGS from Rs 50,000 crore to full cover of Rs 5 lakh crore, with the additional amount reserved exclusively for businesses in the hospitality and related sectors.
Finance Minister Nirmala Sitharaman in the last budget said: “Last year I proposed revamping the MSME Credit Guarantee Scheme. I am pleased to announce that the revamped scheme will come into effect. effective April 1, 2023 through the infusion of Rs 9,000 crore into the corpus.” This will enable additional unsecured secured credit of Rs 2 lakh crore. In addition, the cost of credit will be reduced by approximately 1%.
To ensure easy and more flexible repayment terms on credit extended to the MSME sector, the government has capped the interest rate under the ECLGS scheme at 9.25% for banks and financial institutions and 14% for non-banking financial institutions. This scheme also offers a one-year moratorium on payment of the principal component.
According to a study, ECLGS helped rescue at least 14.6 lakh MSMEs who benefited from Rs 2.2 lakh crore of additional credit. This additional credit flow has prevented about 12% of outstanding MSME (micro, small and medium-sized enterprise) credit from slipping to NPAs.
With the change in the definition of MSMEs, in 2020 the government has required all MSMEs to register on the Udyam portal, which the report says is the way forward for the sector.
A total of 1.33 crore MSMEs now have Udyam certification. On the other hand, the number of GST registrations is only 1.40 crore.