Private Banks Delaying to Extend Loans to MSMEs Even After ECLGS: Industry Body

Despite the clear instruction from the government to disburse more loans under the Emergency Credit Line Guarantee Scheme (ECLGS) to MSMEs, private banks are still dilly-dallying in extending the loans to them, said Laghu Udyog Bharati (LUB).

Laghu Udyog Bharati (LUB) has already taken up the issue with Finance Minister Nirmala Sitharaman and apprised her of the situation.

''While public sector banks such as SBI and Bank of India are extending loans, private banks are still dilly-dallying,'' said Govind Lele, General Secretary, LUB, on Monday.

He also alleged that banks are giving preference to high-value loan accounts while disbursing loans.
"It has been observed that branch officials (of banks) are giving preference to high-value loan accounts so as to complete the target. Hence it is important that the instruction for proportionate sanctioning under the scheme is issued by the government," Lele said.

The LUB further urged the Finance Minister to include non-scheduled cooperative banks in the scheme as they have a very large number of MSMEs.

LUB is also slated to carry out a ground survey to find out if banks are following the government's directive in letter and spirit. It will assess the benefits reaped by struggling MSMEs of the Emergency Credit Line Guarantee Scheme.

Reportedly, the minister had rang up Laghu Udyog Bharati's Lele, last week to take a ground report.
On June 1, the Centre had cleared Rs 3 lakh crore collateral-free and government-guaranteed loans for MSMEs, traders, Mudra borrowers and other eligible firms.

The emergency credit scheme covers existing borrowers with outstanding credit limit of up to Rs 25 crore as on 29 February, 2020 and having a turnover of up to Rs 100 crore. The borrowers are eligible for up to 20% of their entire outstanding loans as an emergency credit line.

The upper limit for interest rate charged by banks and financial institutions has been capped at 9.25%. For the NBFCs, the upper limit is 14%.

So far, public sector banks have disbursed Rs 8,320 crore under the Rs 3 lakh crore ECLGS for the MSME sector.

Recently, MSMEs in Karnataka have alleged banks of framing their own guidelines while disbursing the loans under ECLGS.

The Karnataka Small Scale Industries Association (KASSIA), on last Friday, said that it had received a number of complaints and representations from their members about the difficulties in accessing the schemes.

''MSMEs are seriously concerned about the implementation of the emergency COVID related packages meant as relief for industry as they face innumerable difficulties in accessing benefits of the level at the banks,'' said KASSIA.

''For one, guidelines issued under the Emergency Credit Link Guarantee Scheme (ECLGS) are not uniform and different banks have framed their own guidelines leading to confusion and hardship in making use of the schemes at a time when industries are in dire straits,'' it added.