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Finance minister Nirmala Sitharaman. pti (MINT_PRINT)
Finance minister Nirmala Sitharaman. pti (MINT_PRINT)

Banks sanction 1.37 trillion under emergency credit line guarantee scheme

Latest data show that cumulative sanction is 46% of the target of 3 trillion collateral free loan scheme backed by government guarantee

Banks have banks have sanctioned 1.37 trillion, under the 100% emergency credit line guarantee scheme (ECLGS) rolled out in May to support small businesses. Out of this, two-third has already been disbursed, latest data show.

“As of 03 Aug 2020, the total amount sanctioned under the 100% Emergency Credit Line Guarantee Scheme by PSBs (public sector banks) and private banks stands at 1,37,586.54 crore, of which 92,090.24 crore has already been disbursed," finance minister Nirmala Sitharaman’s office said in a tweet on Tuesday.

Latest data show that cumulative sanction is 46% of the target of 3 trillion collateral free loan scheme backed by government guarantee. While public sector banks continued to lead sanctions and disbursal, private sector banks have also stepped up credit disbursal.

In case of the 12 state-owned banks, 71% of 72,820 credit sanctioned has been disbursed. Private sector lenders have sanctioned 64,766 crore, out of which, 62% has been disbursed. However, the average loan disbursement per account by private banks is much more than state-owned banks

“Under the 100% ECLGS, the loan amounts sanctioned by Public Sector Banks increased to 72,820.26 crore, of which 52,013.73 crore has been disbursed as of 03 Aug 2020," it said.

ECLGS was announced as a part of the government’s 20 trillion financial package to help the poor and the small businesses tide over the covid-19 crisis. This collateral-free loan is expected to enable small businesses to pay salaries, rent, and restocking expenses.

While credit disbursement is slowly picking up with opening of the economy, finance minister Nirmala Sitharaman on Saturday expanded the ambit of ECLGS and allowed loans for larger micro, small and medium enterprises (MSMEs) and professionals to avail the scheme.

In sync with the new definition of MSMEs, the government has increased the annual turnover ceiling of companies that could avail loans under the scheme to 250 crore from 100 crore at present. The maximum amount of loans that can be availed under the scheme has also been increased to 10 crore from 5 crore.

Individuals can avail themselves of ECLGS if they already had loans for business purposes and subject to condition that they fulfill eligibility criteria.

Sitharaman had said that the expansion of the scheme to include individual loans for working capital purposes and larger MSMEs is likely to boost credit offtake by 1 trillion within the overall ceiling of 3 trillion for the scheme.

Last week in a meeting with bank and non-bank lenders, Prime Minister Narendra Modi asked them to scale up lending across the priority sectors such as MSMEs and agriculture, and relook at its lending practice to ensure stable credit growth. "While it was noted that significant progress has been made in most schemes (including ECLGS), banks need to be proactive and actively engage with the intended beneficiaries to ensure that the credit support reaches them in a timely manner during this period of crisis," an official statement had said.

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