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How ECLGS turned out to be lifeline for 1.46 million MSMEs during the pandemic, Health News, ET HealthWorld

New Delhi: The Emergency Credit Line Guarantee Scheme ,ECLS) launched by the government during the pandemic has saved around 12 per cent or Rs 2.2 lakh crore of outstanding msme credit from becoming bad loans and has thus saved 16.5 million jobs till November 2022, according to estimates by the State Bank of India’s Economic Research department.

The SBI report said that of the 1.46 million MSME accounts that have been saved due to the ECLGS, 93.8 per cent were in the micro and small category. The trading sector, such as Kirana shops, benefited the most, followed by food processing, textiles, and commercial real estate.

ECLGS was launched in May 2020 and aimed to support eligible MSMEs and business enterprises in meeting their operational liabilities and restarting their businesses. Under the scheme, lending institutions are provided with 100 per cent credit guarantee for loans extended to eligible borrowers. The admissible guarantee limit under the scheme has been increased from Rs 4.5 lakh to Rs 5 lakh crore.

According to the report, the Udyam Assist Platform (UAP) has the potential to bring 50 million Informal Micro Enterprises (IME) into the formal sector and priority sector lending by banks. The report said that this would result in smaller firms, mostly self-employed, getting registered, boosting employment, and ensuring credit expansion.

The report also highlighted that sectors such as edible oil, printing, consumer durables, pharmaceuticals, jute, aviation, and many others have made a smart recovery post-pandemic, while sectors such as cement, petrochemicals, fertilisers, telecom, and road have not fully recovered yet. Some states such as Delhi, Karnataka, Tamil Nadu, and Maharashtra have recovered from the pandemic in terms of credit outstanding to MSME sector as on March 31, 2022 from their pre-pandemic level (March 31, 2018). The report also stated that loan guarantee schemes by the government for extending credit to MSME sector need further overhaul, as there are multiple schemes in place resulting in complexities for MSMEs.

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