Medium enterprises share 17 per cent of the disbursal, small 26, and micro 24 per cent. Other business enterprises other than MSMEs have been disbursed 33 per cent of the amount. It means actual disbursal to MSMEs are actually about 66 per cent of the disbursal of Rs2.86 lakh crore out of 5 lakh crore earmarked for the announced purpose to help MSMEs through ECLGS.

The ECLGS was announced in May 2020 as part of the Atmanirbhar Bharat (self-reliant India) initiative of PM Narendra Modi in wake of the outbreak of COVID-19 to help various sectors, especially in the MSME segment, to get credit at a concessional rate of 7 per cent. Initial amount was Rs3 lakh crore which has then increased to 4.5 lakh crore in 2021-22, and 5 lakh crore in 2022-23, and is to expire at the end of the fiscal, if the Union Budget 2023-24 do to extend it further.

PM Modi had announce the initiative in May 2020 during the lockdown projecting himself as messiah for the sector, that was greatly suffering from his own demonetization decision on November 8, 2016, and then implementation of GST from July 1, 2017 without preparation. Millions of MSMEs had to be shut down because of cash crunch and millions other scaled down their production level to about 25 per cent. It started the era of joblessness and unemployment in the country, since the sector was traditionally employer of over 90 per cent of the total workforce, and the COVID-19 lockdowns have further deteriorated their condition. Millions of them have lost their viability, and that are still considered to be viable are still fund starved, because the government is quick in announcing schemes but very slow in implementation.

In the Union Budget 2023-23, Union Minister of Finance Nirmala Sitharaman had announced an enhancement of ECLGS amount by adding Rs50000 crore which increased the total amount of Rs4.5 lakh crore to Rs5 lakh crore, with the additional amount being earmarked exclusively for enterprises in hospitality and related sectors. The increase was claimed to have been done on account of severe disruptions caused by COVID-19 pandemic on hospitality and related enterprises. However, more than 4 and half months were lost in merely approving this new proposal. The Union Cabinet, chaired by the PM Narendra Modi, approved the enhancement of Rs50,000 ECLGS only on August 17, 2022, and this additional amount would be made applicable to enterprises in hospitality and related sectors till validity of the scheme which is March 31, 2023.

The cabinet note released at the time of approval had stated that loans of about Rs3.67 lakh crore was sanctioned under the ECLGS till August 5, 2022. Now, as per the Financial Stability Report of the Reserve Bank of India, an amount of Rs2.82 lakh crore has been disbursed till September 30, 2022, of which Scheduled Commercial Banks (SCBs) have disbursed only Rs2.46 lakh crore, with predominant share of disbursals under the ECLGS 1.0, which was the first announcement of Rs3 lakh crore in May 2020.

It means Modi government, that claims to be performing well, could not even disburse the amount announced 2 and half years ago to the MSMEs of the country, despite widening the definition of MSMEs effective from July 1, 2020, that increased the number of enterprises eligible to get benefit from this scheme. The new definition has increased the upper limit of medium enterprises to Rs 250 crore in turn over and Rs50 crore in investment. It was done to help many big enterprises as per the old definition. What is then use of announcing more funds in subsequent two years when even the earlier amount announced under ECLGS was still waiting to be disbursed?

The purpose of ECLGS was to make suitable interventions for sustenance and recovery of the MSMEs. The background for the cabinet note stated that given their high employment intensity and their direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery. Such statements seem only sanctimonious lip service, given the dismal performance of the Centre.

The latest Financial Stability Report of the RBI, says that overall GNPA ratio in the MSME sector in both public and private sector banks (PSBs and PVBs) fell from 9.3 per cent in March 2022 to 7.7 per cent in September 2022. In the backdrop of such an improvement, the asset quality of advances below Rs25 crore, which are usually vulnerable to asset quality concerns, has also improved in September 2022 vis-à-vis March 2022. Though it was an improvement, RBI says, the September 2022 position of ECLGS lending indicates that distress continues in the MSME sector.

Despite such improvements, banks are not helping the MSMEs much under the ECLGS. It should be noted that Regulatory forbearance and restructuring schemes introduced since 2018 has come to an end. As on September 30, 2022, the share of restructured loans in the MSME portfolio of SCBs stood at 5.21 per cent compared to 5.31 per cent on March 31, 2022.

Only about 60 per cent of the ECLGS amount has been disbursed so far, and only two months are left for the expiry of the scheme. From ECLGS 1.0 only 64 per cent has been disbursed and there is 14 per cent extension, while under ECLGS 2.0 disbursal and extensions are only 10 and 9 per cent.

The major sectors availing the ECLGS were services and traders getting 17 per cent each. Textiles got 6 percent and food processing 5 percent. Other industries got only 12 per cent while 43 per cent were disbursed to all others. It is a serious concern because it is lopsided and many sectors are not getting enough for survival of their MSMEs.

Public sector banks are performing badly as against private sector banks in utilization of ECLGS. “PVBs utilized the ECLGS more than PSBs, with the amount disbursed to repeat borrowers of PVBs almost double that of PSBs,” says RBI financial stability report. “Disaggregated analysis of borrowers availing the ECLGS indicates that majority of the smaller borrowers belonged to the micro enterprises category. On the other hand, in terms of quantum of disbursal, about a third was availed by businesses other than MSMEs, indicating the broad nature of stress.”