Government officials have reported that the Non-Performing Assets (NPA) under the Emergency Credit Line Guarantee Scheme (ECLGS) stand at approximately 6 percent. This indicates that the cost of providing full guarantees under the scheme will be lower than initially expected.
- Total Liquidity Support: ₹3.68 lakh crore
- Reported NPAs: ₹22,000 crore
- NPA Ratio: 6 percent
The NPA definition under ECLGS aligns with the Reserve Bank of India (RBI) standards. As per RBI’s definition effective from March 31, 2004, an asset is considered non-performing if interest or principal payments are overdue for more than 90 days on a term loan.
Trends in Bad Debts
The trends in bad debts under ECLGS reflect the overall system data:
- Scheduled Commercial Banks:
- Gross Non-Performing Assets (GNPA) Ratio: 2.8% (end-March 2024)
- Net Non-Performing Assets (NNPA) Ratio: 0.6% (end-March 2024)
- Non-Banking Financial Companies (NBFCs):
- GNPA Ratio: 4% (end-March 2024)
ECLGS Scheme Details
Launched in May 2020, the ECLGS aims to provide liquidity support to businesses affected by the COVID-19 lockdown. Key aspects of the scheme include:
- Coverage: Loans sanctioned under ‘Guaranteed Emergency Credit Line’ up to March 31, 2023, or until ₹5 lakh crore guarantees are issued.
- Guarantee Coverage: 100% guarantee on credit extended to business enterprises/MSMEs based on loan outstanding as of February 29, 2020.
- Expansion: Initially for MSMEs, later extended to 26 stressed sectors, healthcare, and hospitality.
Impact and Beneficiaries
- Total Businesses Supported: 1.19 crore
- Share of MSMEs:
- Number of Guarantees: 95%
- Amount of Guarantees Issued: 65%
- Borrower Demographics:
- Micro Borrowers: 88%
- MUDRA Borrowers: 78%
- Women Borrowers: 68%
- Employees Benefitted: Approximately 6.25 crore
The scheme’s efficacy was highlighted in the World Development Report 2022 by the World Bank, noting that the true cost of guarantees will be clearer in the long term. While the immediate fiscal impact is low, credit guarantees carry the risk of becoming a government liability if economic conditions worsen.
ECLGS Achievements
- MSMEs Accounts Saved: 14.6 lakh
- Improved MSME Loan Accounts: ₹2.2 lakh crore
- Outstanding MSME Credit Saved from NPA: 12%
- Livelihoods Saved: 6.6 crore
Multiple Choice Questions (MCQs):
- What is the reported NPA ratio under the Emergency Credit Line Guarantee Scheme (ECLGS)?
- A) 2.8%
- B) 6%
- C) 4%
- D) 0.6%
- When was the ECLGS launched?
- A) March 2020
- B) May 2020
- C) January 2021
- D) December 2021
- According to the latest data, what is the GNPA ratio for scheduled commercial banks at the end of March 2024?
- A) 0.6%
- B) 2.8%
- C) 4%
- D) 6%
- What percentage of guarantees issued under ECLGS is for MSMEs in terms of the number of guarantees?
- A) 88%
- B) 95%
- C) 65%
- D) 78%
- How many MSME loan accounts worth ₹2.2 lakh crore improved due to the ECLGS?
- A) 6.25 crore
- B) 14.6 lakh
- C) 12%
- D) 6.6 crore