“The take-off is sudden and it is relatively big and the only set of enterprises to see an increase in bank loans are medium, micro and small enterprises,” CMIE said in its weekly analysis.
According to CMIE, these enterprises have largely, or possibly almost entirely, benefited from the central government’s Emergency Credit Line Guarantee Scheme (ECLGS), launched in November 2020.
ECLGS loans are top-up loans to help existing business enterprises overcome their difficulties arising out of lockdowns and other pandemic related ill-effects.The scope of the scheme was enhanced in November 2020, March 2021 and May 2021. Till November 2021, Rs 2.9 lakh crore was sanctioned under the scheme.
Citing the RBI data, CMIE said the net increase in outstanding bank lending to medium, micro and small enterprises between April 2020 and November 2021 was Rs 1.37 lakh crore.
“It seems that the ECLGS was effective in arresting any major financial stress in the operations of the MSME sector. But what explains the sharp pick-up in loans to the medium, micro and small enterprises in 2021-22 is that these loans are 100% guaranteed by the central government and there is no processing fee,” CMIE added.
Reiterating the findings of a recent study by TransUnion CIBIL (ECLGS Insights Report, December 2021), CMIE said that 45% of the ECLGS loans were used to clear vendors, 13% for paying salaries and 29% to restart operations.
According to CMIE, outstanding loans of scheduled commercial banks to medium-sized enterprises grew from Rs 1 lakh crore for three years till August 2020 to Rs 1.8 lakh crore by October 2021 with the average monthly outstanding SCB credit to medium-sized industrial enterprises during April-November 2021 43% higher than it was in 2020-21.
CMIE said this is an extraordinary increase in loans outstanding to medium-sized industrial enterprises for two reasons. “First, the overall growth in credit has been modest at only around 8% in a similar comparison. In comparison to this overall trend, the sudden spike in growth in loans to medium-sized industrial units is extraordinary,” it said.
“Secondly, prior to this sudden increase, loans outstanding against these enterprises had remained stagnant for over three years. The sudden spurt therefore is extraordinary, again,” it added.
