In order to assess the impact of the Emergency Credit Line Guarantee Scheme (ECLGS), TransUnion CIBIL undertook an ECLGS loan analysis study* based on ECLGS 1.0 and 2.0 disbursals made up to 31 March 2021. A report based on this study has been launched which provides insights on the performance of ECLGS loans based on the flow of credit and the nuances of the borrower behaviour.
Flow of credit under ECLGS led by Public sector banks; benefitted the vulnerable segments
Public sector banks with their extensive network and early operationalization of the ECLGS, have enabled the scheme to reach out to a higher number of MSME borrowers across the length and breadth of India. Of the total loan applications received under the scheme, the share issued by public sector banks is about 47%. At the same time, even though private banks took longer on starting implementation of the scheme, they have contributed a similar magnitude in terms of amount disbursed, contributing 44% share. Given the fact that public and private sector banks cater to the credit needs of different MSME segments, as expected, the average ticket size of ECLGS loans extended by private banks is higher than that for the public sector banks.
Speaking on the findings of this report, the MD & CEO of TransUnion CIBIL, Mr. Rajesh Kumar said, “ECLGS support has significantly helped in revitalizing the MSME sector which forms the backbone of India’s economic engine. Public sector banks led from the front on the implementation of ECLGS. They efficiently channeled credit infusion to deserving MSMEs in a timely manner by astutely utilizing credit information analytics and digital drivers. Credit infusion through the ECLGS has set the MSME sector on a long-term and sustainable growth trajectory which bodes well for the resurgence of India’s economy.”
While the COVID-19 crisis impacted MSMEs across the board, the very small and micro enterprises were the ones to be affected the most, as their ability to withstand crisis of large magnitude is limited. These were the MSMEs who needed immediate liquidity to navigate through the crisis and sustain their livelihood. Report analysis highlights that the ECLGS scheme has benefitted this class of MSME segment. Of the total number of borrowers who availed loans under this scheme, 58.5% belong to the very small category (overall exposure less than INR 10 Lakhs) and 32% belong to the micro category (exposure between INR 10 Lakhs and 1 Cr). In terms of value, the share of very small and micro segment is at 30% of the disbursed amount. This is encouraging given the fact that the COVID-19 crisis has impacted very small and micro enterprises the most, and ECLGS has offered these MSMEs much needed liquidity to navigate through the crisis.
Chart 1.1: Distribution of borrowers by size based on count
|Borrower Category||Distribution of availed borrowers (by count)|
|VERY SMALL (<10L)||58.5%|
|MICRO (10L to 1Cr)||31.7%|
|SMALL (1 Cr to 10 Cr)||8.7%|
|MEDIUM (10 Cr to 25 Cr)||1.1%|
The ECLGS has also helped facilitate the resurgence of sectors that were more severely affected by the pandemic. COVID-19 and subsequent restrictions, because of their nature, are widely accepted to have had a higher impact on sectors like retail trade, wholesale trader, transport, professional services, tourism, hotels & restaurants that are heavily dependent on mobility. These sectors accounted for 75% of the total disbursements made under ECLGS 1.0 and ECLGS 2.0, indicating that the scheme has been most focused on the revival of these highly affected sectors.
Further analysis shows that the top five states of Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Karnataka that are high on industrial and commercial activity and also have a significant share in overall MSME exposure, contribute to 47% of total ECLGS loan disbursement.
ECLGS infusion helped improve credit health of borrowers while supporting business revival and fostering a positive outlook amongst MSMEs
Insights from the report show that the ECLGS has helped stressed MSMEs cope with the impact of the pandemic. Analysis highlights that stressed MSME borrowers (borrowers with CIBIL Rank 7 to 10) had a better avail rate*** compared to non-stressed borrowers. ECLGS loans have helped these borrowers come out of the crisis situation, as evidenced by score upgrades (movement from a higher risk bucket to a lower risk bucket) which were better for high-risk borrowers who availed ECLGS facilities as compared to those who did not.
As part of this study, TransUnion CIBIL conducted a survey of MSMEs from across geographies. The survey findings indicate that 65% of MSMEs believe that the ECLGS credit infusion has helped their business through financial troubles and 68% were confident about a future positive outlook. About 85% of respondents also acknowledged that their TransUnion CIBIL credit history has played a critical role in facilitating ECLGS disbursals.
The very small category of borrowers and micro-segment of borrowers reduced their average balance by 33% after availing of the ECLGS facility, whereas small and medium segments showed a balance decrease of 22% and 14% respectively. For all segments, eligible borrowers who did not avail of the facility had balance decrease of less than 10%.
“ECLGS support met its objective by providing much needed financial assistance to the MSME segments that were most vulnerable to the impact of the pandemic such as very small and micro businesses as well MSMEs operating in stressed sectors like trade, transport and hospitality. This timely financial infusion will help MSMEs to revive their businesses and enhance prospects for sustainable growth,” concluded Rajesh.