Credit and finance for MSMEs: The average MSME loan ticket size decreased among existing and new borrowers during the first nine months of 2020. For existing borrowers to a bank (ETB), the average loan size increased by over Rs 40 lakh in January 2020 at less than Rs 10 lakh in September. Likewise, the average loan amount for new bank borrowers (NTB) has also increased from Rs 18 lakh in January to over Rs 10 lakh in September, according to SIDBI’s MSME Pulse report from February 2021. “The reduction in the Note size is largely due to the 20% cap of the Emergency Lines of Credit Guarantee Program (ECLGS). Moreover, with the impact of Covid on revenue, the requirement had probably also decreased, which led to the drop, ”said Ramesh Kumar, deputy director, Economic research and vertical data analysis, SIDBI at Financial Express Online.
Launched in May 2020 to support MSMEs and other businesses affected by Covid, ECLGS 1.0 was amended on November 26, 2020 and extended until March 31, 2020, with the introduction of ECLGS 2.0 whose scope has been expanded. Under 1.0, an emergency line of credit has been offered by banks and NBFCs up to 20% of total business credit outstanding as of February 29, 2020. MSMEs with up to Rs 25 crore and a Turnover of Rs 100 crore was eligible. However, the turnover cap was removed after the change in November.
The change in appetite for loans was also observed among all lenders, including private and public sector banks and nonbank financial corporations. Average note size for MSME loan arrangements increased from around Rs 40.7 lakh in January to Rs 20.9 lakh in June, but rebounded to Rs 40.1 lakh in September by banks private. On the other hand, the average loan size of NBFCs was the most stable among the three types of lenders. From 20 lakh in January, the average loan amount of NBFC stood at around Rs 10.8 lakh against Rs 20 lakh in January. For public banks, the size increased from Rs 20 lakh to around Rs 5 lakh during the said period.
In addition, loans to post-Covid ETB borrowers have also increased thanks to the ECLGS scheme. ETB loans increased from 7% in January-September 2019 to 30% in January-September 2020. According to the report, this trend had started to manifest itself even before the launch of the ECLGS, but after the launch of the ECLGS. , it became even more pronounced. “ECLGS is for existing borrowers only. After the launch of ECLGS, it was evident that banks were supporting more ETBs as they would find solace from existing borrowers, ”Kumar added.