Govt should raise maximum loan amount for coverage under MSME credit guarantee scheme: SBI Research
2 min read . Updated: 23 Jan 2023, 08:59 PM IST
Premium- SBI Research recommended that guarantee coverage for the units having women promoters should be increased to 100% to give fillip to women entrepreneurship
NEW DELHI : Around a week ahead of the union budget, a report by SBI Research has suggested that there is an urgent need to revamp the credit guarantee scheme for MSMEs.
The report released on Monday suggested that government should raise the maximum loan amount for coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to ₹5 crore for all activities under manufacturing, services and trade sector from the current limit of ₹2 crore.
“There is an urgent need to revamp the Credit Guarantee Scheme for the MSME sector. The U.S. Small Business Administration (US-SBA) could be the template for evolving CGTMSE as a friend-philosopher-guide-mentor for MSMEs proliferation, credit linkage, scaling and integration into the value chain," it said.
It also recommended that guarantee coverage for the units having women promoters should be increased to 100% to give fillip to women entrepreneurship.
The SBI Research report said that in the post-Covid period, credit growth to MSMEs in the industrial sector was distinctly higher on both, year-on-year (YoY) basis as well as in comparison with credit growth to large industries.
“Incentives provided by the Emergency Credit Line Guarantee Scheme (ECLGS), coupled with lower GNPA ratios have helped in boosting credit to MSMEs. Additionally, beginning FY22, there is evidence of MSME units getting bigger with several units crossing the threshold of ₹250 crores turnover and turning mid sized corporates by the new definition of MSME units," it said.
Observing that SME units are becoming larger with the rise in economic activity, the report said that it will increase the ability of MSME units to raise capital through debt markets.
Further, only 410 companies currently have till date listed on the BSE SME platform but nearly 40% of them have moved up to mainstream platform, indicating capital market listing helps in gaining further scale much quickly.
On the progress made by the Emergency Credit Line Guarantee Scheme (ECLGS) launched amid the first wave of the pandemic in 2020, the report said at least 14.6 lakh MSMEs accounts were saved due to the scheme.
“In absolute terms, MSME loan accounts worth ₹2.2 lakh crore improved since inception of ECLGS for entire banking industry. This means that around 12% of the outstanding MSME credit has been saved from slipping into NPA because of the ECLG scheme," it said.
Of 14.6 lakh MSMEs accounts that are saved due to ECLG scheme, almost 93.8% were in micro and small category. As per analysis of SBI Research, if such units slipped into NPA, then 1.65 crore workers would have become unemployed.
“Thus, the ECLG scheme has saved the livelihood for 6.6 crores," it said.