Tag: emergency credit line guarantee

Banks dole out over Rs 11,000 crore loans under govt’s credit outreach programme, BFSI News, ET BFSI

Banking & Finance

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State-owned banks and private banks have so far sanctioned loans worth over Rs 11,000 crore under the credit outreach programme. “As part of the government’s nationwide credit outreach programme that commenced on Oct 16, all PSU banks and private banks have sanctioned more than 193,000 loans totalling 111.68 bln rupees,” Finance Minister Nirmala Sitharaman‘s office tweeted.

Lenders sanctioned loans through 924 camps held in 405 districts from October 16-20.

The loan mela

Over 1 lakh borrowers availed business loans of about Rs 6,268 crore, followed by 62,616 borrowers availing agriculture loans of about Rs 1,874 crore.

Earlier this month, the finance ministry has asked PSU banks to start a nationwide loan outreach programme ahead of the festive season, and later.

Banks were asked to set targets of loans to be sanctioned during the district-wise outreach programme. They were also told to tie up with FinTech firms and non-banking financial companies to disburse loans to even small borrowers.

The banking system is bloated with liquidity, which has jumped from Rs 4.5 lakh crore in 2019 to over Rs 7.5 lakh crore currently, mainly due to weak credit demand.

The finance ministry feels that various sectors need credit support and asked banks to hold talks with exporters and various associations to support their loan needs.

FM announcement

Finance Minister Nirmala Sitharaman had announced a district-wise outreach to be undertaken by banks to help credit growth from October.

A push to credit growth from such outreach efforts will also help the momentum set by the stimulus packages, which have been extended by the government since the onset of the pandemic.

In late 2019, banks had conducted the “loan melas” in 400 districts to push up sagging credit growth. Even now, the credit growth is stuttering at around 6 per cent.

“I think it is too early to conclude whether there is a lack of demand… I don’t think it is time yet to conclude that there is no credit pick-up. Even without awaiting indications, we have taken steps to ramp up credit,” Sitharaman had said.

She noted that over Rs 4.94 lakh crore was disbursed by banks between October 2019 and March 2021 through the outreach initiatives.

Gross NPAs may rise

Gross non-performing assets (NPAs) of banks are expected to increase to 8-9 per cent in the current financial year, credit rating agency Crisil said in a report.

This will be well below the peak of 11.2 per cent seen at the end of fiscal 2018.

According to the agency, the COVID-19 relief measures such as the restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS) will help limit the rise in banks gross NPAs.

With around 2 per cent of bank credit expected under restructuring by the end of this fiscal, stressed assets comprising gross NPAs and loan book under restructuring should touch 10-11 per cent this fiscal, it said.

“The retail and MSME segments, which together form close to 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around,” the agency’s senior director and deputy chief ratings officer Krishnan Sitaraman said in the report.

Stressed assets in these two segments are seen rising to 4-5 per cent and 17-18 per cent, respectively, by this fiscal end, he said.

The agency said the operationalisation of the National Asset Reconstruction Company Ltd (NARCL) by the end of this fiscal and the expected first-round sale of Rs 90,000 crore NPAs could lead to lower reported gross NPAs.

The report expects the corporate segment to be far more resilient. A large part of the stress in the corporate portfolio had already been recognised during the asset quality review initiated five years ago.



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Banks may see stress rising in retail, MSME segments by March, BFSI News, ET BFSI

Banking & Finance

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Domestic rating agency India Ratings on Tuesday maintained a stable outlook on the banking sector for 2021-22 while it expects an increase in stressed assets in retail and MSME segments by end-March.

It estimates gross non-performing assets (GNPA) of the banking sector to be at 8.6 per cent and stressed assets at 10.3 per cent for fiscal 2021-22.

“We have maintained a stable outlook on the overall banking sector for the rest of FY22, supported by the continuing systemic support that has helped manage the system-wide COVID-19 linked stress,” the rating agency said in its mid-year banks outlook released on Tuesday.

Banks will continue to strengthen their financials by raising capital and adding to provision buffers which have already seen a sharp increase in the last three to four years, it said.

Private banks

The agency said its stable outlook on large private banks indicates their continued market share gains both in assets and liabilities, while competing intensely with public sector banks (PSBs). Most have strengthened their capital buffers and proactively managed their portfolio.

Outlook on PSBs takes into account continued government support through large capital infusions (Rs 2.8 lakh crore over FY18-FY21 and further Rs 0.2 lakh crore provisioned for FY22), it said.

The agency has a negative outlook on five banks (about 6.5 per cent of system deposits), driven primarily by weak capital buffers and continued pressure on franchise.

It estimates that the asset quality impact in the retail segment has been higher for private banks with a median rise of over 100 per cent in gross NPAs over Q1 FY21 to Q1 FY22 (about 45 per cent for PSBs).

“Banks have also undertaken restructuring in retail assets (including home loans), which could have postponed an immediate increase in slippages. Overall stressed assets (GNPA + restructured) in the segment is expected to increase to 5.8 per cent by end-FY22,” the report said.

It said the MSME sector has been under pressure with demonetisation, introduction of GST and RERA, slowing down of large corporates and now COVID-19.

ECLGS stress

However, the government has supported the segment by offering liquidity under the Emergency Credit Line Guarantee Scheme (ECLGS) and restructuring, it said adding that it expects that beginning Q3 FY22, a portion of such advances would start exiting moratoriums a part of which could slip.

GNPAs of MSMEs is expected to increase to 13.1 per cent by end-FY22 from 9.9 per cent in FY21. Stressed assets similarly would increase to 15.6 per cent from 11.7 per cent.

For corporate segment, the agency estimates GNPAs to increase to 10.2 per cent and stressed asset to increase to 11.3 per cent.

The rating agency has kept its FY22 credit growth estimates unchanged at 8.9 per cent for FY22, supported by a pick-up in economic activity post Q1 FY22, higher government spending especially on infrastructure and a revival in demand for retail loans.

Last week, the agency had changed the outlook to improving from stable for retail non-banking finance companies (NBFCs) and housing finance companies (HFCs) for the second half of FY22.

It said non-banks have adequate system liquidity (because of regulatory measures), sufficient capital buffers, stable margins due to low funding cost and on-balance sheet provisioning buffers.

These factors provide ‘enough cushion to navigate the challenges that may emanate from a subdued operating environment leading to an increase in asset quality challenges due to the second covid wave impacting disbursements and collections for non-banks’, it had said.



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Banks disburse over Rs 2 lakh cr under ECLGS till mid-July, BFSI News, ET BFSI

Banking & Finance

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Nearly 17 months after the launch of the Emergency Credit Line Guarantee Scheme (ECLGS), banks have sanctioned Rs 2.76 lakh crore, with disbursals adding up to Rs 2.14 lakh crore till mid-July.

Similarly, the PM SVANidhi scheme, providing loans of up to Rs 10,000 to street vendors, has seen flows of a little over Rs 2,500 crore to 25 lakh vendors, although the internal target was more ambitious, with banks nudged to give loans.

Although the government has announced an increase in the ECLGS limit from Rs 3 lakh crore to Rs 4.5 lakh crore, officials do not expect a major surge, amid demands that eligibility norms be eased to enable more small businesses to use the window. When the scheme was announced last year, it was meant for micro, small and medium enterprises (MSMEs), but the scope was enlarged later as the demand was not sufficient.

Up to July 2, a little less than 1.1 crore MSME borrowers have been provided guarantee-based support amounting to Rs 1.65 lakh crore, which translates into an average ticket size of Rs 1.5 lakh. Under the originally announced scheme, MSMEs that had loans of up to Rs 50 crore at the end of February 2020 were eligible even with past dues of up to 60 days.

MSME industry groups say that the conditions are such that it is difficult for businesses to get a loan. “The requirements were such that only a certain set of entities with existing loans were eligible. Now banks are reluctant to lend. The government should have dropped the condition of prior credit because we are seeing cash flows being disrupted for a lot of MSME units,” said Animesh Saxena, president of Federation of Indian Micro and Small & Medium Enterprises (FISME).

Recently, the parliamentary standing committee on industry noted that there is a huge gap between sanctions and disbursals as banks feared defaults in the wake of the second wave, and also said that only half the amount has gone to small businesses.



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Banks disburse over Rs 2 lakh crore under ECLGS till mid-July, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Nearly 17 months after the launch of the Emergency Credit Line Guarantee Scheme (ECLGS), banks have sanctioned Rs 2.76 lakh crore, with disbursals adding up to Rs 2.14 lakh crore till mid-July. Similarly, the PM SVANidhi scheme, providing loans of up to Rs 10,000 to street vendors, has seen flows of a little over Rs 2,500 crore to 25 lakh vendors, although the internal target was more ambitious, with banks nudged to give loans.

Although the government has announced an increase in the ECLGS limit from Rs 3 lakh crore to Rs 4.5 lakh crore, officials do not expect a major surge, amid demands that eligibility norms be eased to enable more small businesses to use the window. When the scheme was announced last year, it was meant for micro, small and medium enterprises (MSMEs), but the scope was enlarged later as the demand was not sufficient.

Up to July 2, a little less than 1.1 crore MSME borrowers have been provided guarantee-based support amounting to Rs 1.65 lakh crore, which translates into an average ticket size of Rs 1.5 lakh. Under the originally announced scheme, MSMEs that had loans of up to Rs 50 crore at the end of February 2020 were eligible even with past dues of up to 60 days. MSME industry groups say that the conditions are such that it is difficult for businesses to get a loan. “The requirements were such that only a certain set of entities with existing loans were eligible. Now banks are reluctant to lend. The government should have dropped the condition of prior credit because we are seeing cash flows being disrupted for a lot of MSME units,” said Animesh Saxena, president of Federation of Indian Micro and Small & Medium Enterprises (FISME).

Recently, the parliamentary standing committee on industry noted that there is a huge gap between sanctions and disbursals as banks feared defaults in the wake of the second wave.



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Rane, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: As many as 13.06 lakh MSME loan accounts with an aggregate amount of Rs 55,333 crore have been restructured by public sector banks till June 25 this year, Parliament was informed on Thursday. MSME minister Narayan Rane also said that till July 2, Rs 2.73 lakh crore have been sanctioned under the Emergency Credit Line Guarantee Scheme.

The scheme was launched for an emergency credit line of up to Rs 4.5 lakh crore to businesses including micro, small and medium enterprises (MSMEs) and the same is backed by 100 per cent central government guarantee.

Till June 25 this year, “13.06 lakh MSME loan accounts with an aggregate amount of Rs 55,333 crore have been restructured by public sector banks,” he said in a written reply to the Lok Sabha.

In a separate reply, he said since the inception of the Prime Minister’s Employment Generation Programme, till July 9, 6,97,612 units have been set up (including those by farmers) with MM (margin money) subsidy of Rs 16,688.17 crore.



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Around 1.09 crore MSME borrowers gets guarantee support under ECLGS, BFSI News, ET BFSI

Personal Finance

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New Delhi, Jul 19 () Around 1.09 crore MSME borrowers have been provided with guarantee support amounting to Rs 1.65 lakh crore as of July 2 this year under the Emergency Credit Line Guarantee Scheme (ECLGS), Parliament was informed on Monday. The scheme is part of the Aatmanirbhar Bharat Abhiyaan package announced by the government to mitigate the distress caused by the lockdown due to COVID-19 by providing credit to different sectors, especially MSMEs.

“As part of the Aatma Nirbhar Bharat Abhiyaan, under the ECLGS, around 1.09 crore MSME borrowers have been provided with guarantee support amounting to Rs 1.65 lakh crore as on July 2, 2021,” MSME Minister Narayan Rane said in a written reply to the Rajya Sabha.

In another reply, he also said that as of July 2, 2021, an amount of Rs 2.73 lakh crore has been sanctioned under the scheme, of which Rs 2.14 lakh crore has been disbursed. RR BAL



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MSME loans risky even as banks transmitted rate cuts the most, BFSI News, ET BFSI

Banking & Finance

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Even as banks have transmitted rate cuts most to the MSME sector and education loans during pandemic, they are still perceived to be risky. The spread over one year benchmark lending rate is highest for such loans, according to a study by RBI economists

Spreads of weighted average lending rates (WALRs) on fresh rupee loans over 1-year marginal cost of funds-based lending rate (MCLR) for loans to MSME was 179 basis points (bps- one bps is 0.01 per cent) in May, factoring the median WALR at 7.28 per cent even as banks transmitted 132 bps of policy rate cuts during the pandemic between April 2020 and May 2021, analysis by the economists in a study published in the latest monthly bulletin showed. Such spread for education loan was 219 per cent and the banks transmitted 162 basis points. Put simply, even though these loans are risky, lending rates were lowered to revive activities.

“Despite the restructuring, however, stress in the MSME portfolio of PSBs remains high” noted RBI’s latest financial stability report (FSR). ” Given the elevated level of debt of the stressed cohort, the implications of business disruptions following the resurgence of the pandemic could be significant.”

” (The spreads) were uneven across sectors reflecting their varied credit risk profiles and business strategies followed by banks” the study noted. The spread was among the lowest in respect of housing loans, reflecting lower defaults and the availability of collaterals and highest for personal loans . “Personal loans (other than housing and vehicle loans) are mostly unsecured and involve higher credit risk and hence, the spread charged was the highest for other personal loans”. But in terms of transmission, personal loans were lower by only around 100 bps points during the period.

Boosted by The Emergency Credit Line Guarantee Scheme (ECLGS) disbursements to eligible categories, net credit flow to stressed MSMEs during March 2020-February 2021 rose to Rs 50,535 crore with the shares of public sector banks and private sector banks at 54 per cent and 35 per cent, respectively, according to the latest Financial Stability Report. The Emergency Credit Line Guarantee Scheme provides 100% guarantee to banks for loan portfolio of up to Rs. 3 lakh crore to eligible MSMEs.

“Going forward, close monitoring on asset quality of MSME and retail portfolios of banks is warranted” the financial” the FSR noted.

Rating agencies have warned of balance sheet implication for banks. “The reduced dent on the balance sheet of financial institutions over the last year may deepen further in case the regulator withdraws its supportive stance to eligible segments under the retail, agriculture and MSME industry” said the July review by Brickwork Ratings.



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