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MSME credit scheme: Industry experts welcome fresh stimulus package, calls for more direct support over bank loans

Microfinance lenders and sector analysts welcomed the move to increase the outlay for credit guarantee schemes and facilitate lending to bottom-of-the-pyramid borrowers. However, there still remains room to do more, they said.

June 28, 2021 / 07:43 PM IST

The fresh round of economic stimulus measures announced on 28 June by Union finance minister Nirmala Sitharaman to support micro, small and medium enterprises (MSMEs) and bottom-of-the-pyramid borrowers are important, but these measures rely excessively on bank loans, industry players and sector experts said.

In a poor demand scenario, these loans could add to the indebtedness of the borrowers, they added.

The Finance Minister on Monday announced a stimulus package worth Rs 6.29 lakh crore to give relief to the struggling segments of the industry from the second wave of the Covid-19 pandemic. Among the measures announced was a decision to increase the scope of the emergency credit line guarantee scheme (ECLGS) to Rs 4.5 lakh crore from Rs three lakh crore earlier. The package also included a credit guarantee for bank loans to microfinance institutions (MFIs) for on lending upto Rs 1.25 lakh to 25 lakh small borrowers. Out of the Rs 3 lakh crore, banks have already sanctioned around Rs 2.7 lakh crore and disbursed around Rs 2.1 lakh crore under the ECLGS scheme, according to the latest available data.

The ECLGS scheme, under which MSMEs are entitled to an additional 20 percent of loans backed by a sovereign guarantee, was earlier extended up to 30 September, 2021.