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ECLGS Continues to Catalyze Revival of MSMEs across India

ECLGS Continues to Catalyze Revival of MSMEs across India

TransUnion CIBIL releases second edition of its ECLGS study*

· 83% of borrowers that availed ECLGS up to March 2022 were micro enterprises**

· Maharashtra saw the highest disbursement amount (13.6%) while Uttar Pradesh has highest (35%) avail rate

· NPA rate (March 2022) of borrowers who availed ECLGS facility (4.8%) is lower than the NPA rate of borrowers who were eligible but did not avail the facility (6.1%)

Mumbai, August 29, 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 CIBIL study on the flow of credit and changes in borrower behavior and performance based on ECLGS disbursals made up to 31 March 2022.

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 available to 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.

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 trends in the MSME market (excluding ECLGS borrowers).

Micro enterprises led the uptake; both public and private sector banks supplied funding

As MSMEs depend on daily cash flows, they are very vulnerable to any kind of economic crisis. These enterprises generally do not have excess reserves or a cash surplus to help them withstand a crisis situation. The ECLGS was designed to provide immediate liquidity for these enterprises. TransUnion CIBIL’s analysis shows that the scheme has been able to meet this objective, as 83% of the borrowers that availed ECLGS up to March 2022 were micro enterprises. Within this category, 54% of borrowers were those whose overall exposure at the time of availing ECLGS was up to INR 10 lakh.

On the supply side, both public and private sector banks played pivotal roles in driving the scheme over the last two years. While public sector banks were early adopters in implementing the scheme as soon as it was released, private banks rapidly caught up, helping propagate the scheme to a wider set of borrowers and expanding its geographical coverage. The contributions of public and private sector banks in terms of amount disbursed was 42.8% and 43.1%, respectively, with non-bank financial companies, small finance banks, and rural regional banks disbursing the balance. However, public sector banks processed the highest number of applications.

Analysis in the report reveals that states with prominent commercial centers and where the concentration of MSMEs is higher hold a larger share in the ECLGS, both in terms of count and value. The avail rate indicates that there is no material disparity in access between states, and the scheme has benefitted MSMEs across the length and breadth of the country. The ticket sizes also reflect the concentration of MSMEs by size. For example, the average ticket size is higher in Delhi where the proportion of medium enterprises is high, and lower in West Bengal, which has a higher proportion of micro enterprises.

The study also covers an analysis of NPAs (non-performing assets – i.e. loans in default for 90 days or more) in the ECLGS and the findings show that the NPA rate in March 2022 is 4.8% for borrowers who availed ECLGS facility, compared to an NPA rate of 6.1% for borrowers who were eligible but did not avail the facility. Similarly, the roll forward rate from 1-89 days-past-due (DPD) to 90+ DPD is lower for borrowers who availed ECLGS. This indicates that the liquidity provided under the ECLGS has helped in arresting probable default and protected both borrowers and lenders from bad loans.


** Given the constraints around availability of turnover data in TransUnion CIBIL commercial database and based on the findings mentioned in the report , it was reasonably concluded that exposure may be effectively used to classify MSME borrowers. Accordingly, the following definition of MSME in terms of credit exposure has been used.

· Micro: Exposure up to INR 1 crore

· Small: Exposure between INR 1 crore and INR 10 crores

· Medium: Exposure between INR 10 crores and INR 50 crores

*** Avail rate defined as borrowers taking ECLGS loans as a percentage of total eligible base


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