According to an analysis by SBI’s economic research department, Incentives provided by the ECLGS have helped in boosting credit flow to MSMEs, with at least 14.6 lakh MSME accounts being saved due to the scheme.

 

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As per the ERD’s analysis, in absolute terms, MSME loan accounts worth ₹2.2 lakh crore improved since the inception of ECLGS for the entire banking industry. According to Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, this means that around 12 percent of the outstanding MSME credit has been saved from slipping into NPA (non-performing asset) because of the ECLG scheme. Outstanding loans to MSMEs increased from ₹16 lakh crore in FY20 to ₹18 lakh crore in FY21 and ₹20 lakh crore in FY22. The report said that the government-backed scheme, which has been much more successful (vis-a-vis the Credit Guarantee Fund Trust for Micro and Small Enterprises/ CGTMSE) in assuaging hardships to the MSME sector, has saved the livelihoods of about 6.6 crore people (assuming four family members per worker including herself/himself). ECLGS was launched by the government given the Covid-19 crisis. It provides a 100 percent guarantee to banks and NBFCs to enable them to extend emergency credit facilities to MSMEs/ Business Enterprises (with an outstanding loan of up to ₹50 crores as on February 29, 2020, and turnover of up to ₹250 crores in FY20) to meet their additional term loan/ working capital requirements. The report noted that there is clear evidence that the MSME units are becoming larger with several units crossing the threshold of ₹250 crore turnover and turning mid-sized corporates by the new definition of MSME units. Adding this reveals the integration of MSME units with a larger value chain as PLI (production-linked incentive) activity is getting momentum. According to Ghosh, the data indicate that all the SME units are becoming larger with the rise in economic activity. This will increase the ability of MSME units to raise capital through (non-bank) debt markets. Only 410 companies have been listed on the BSE SME platform but nearly 40 percent of them have moved up to a mainstream platform, indicating capital market listing helps in gaining further scale much more quickly.

Referring to the Udyam Assist Platform (UAP), the report estimated that the platform would benefit up to 5 crore informal micro enterprises (IMEs). UAP has been developed by SIBDI to enable IMEs that aren’t registered under GST to get a registration certificate from the government based on the information available with banks/NBFCs. The report added that states like West Bengal, Uttar Pradesh, Tamil Nadu, Karnataka, and Andhra Pradesh could benefit with 2.6 crore registrations of IMEs. Ghosh said that nudging IMEs into the ambit of formalization will result in smaller firms that are mostly self-employed getting registered, which in turn boost employment, ensure credit expansion, and lay forth architecture for formal credit mechanisms. With the change in MSME definition in 2020, the government mandated all MSMEs to register under the Udyam portal. The number of GST registration in India is about 1.40 crore whereas the current MSME units registered under Udyam Certification is about 1.33 crore.

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