MSMEs’ `3-lakh cr credit scheme off to a slow start

Even after a month of its launch, the government's ambitious Rs 3-lakh crore credit guarantee scheme for micro, small and medium enterprises (MSMEs) is learnt to be running at a snail's pace due to muted demand, though the government claims MSME interventions have been gaining rapid traction.

Actual disbursals under the scheme are 11.6 per cent of the targeted amount, or roughly Rs 35,000 crore till June 20. This is less than half of the loans worth Rs 79,000 crore sanctioned, by both public and private sector lenders, till Saturday.

As part of the Aatmanirbhar Bharat package, the government had announced Rs 3 lakh crore as additional credit to MSMEs and small businesses, to be disbursed in six months, starting from May 23. Enterprises are eligible to receive up to 20 per cent of their existing borrowing as additional loans at pre-set interest rates under the Guaranteed Emergency Credit Line. "The interventions by government for MSMEs have been gaining rapid traction. The top lenders under the scheme are SBI, HDFC Bank, Bank of Baroda, PNB & Canara Bank. This has helped 19 lakh MSMEs and other businesses restart their businesses post the lockdown," a finance ministry statement said on Tuesday.

However, a senior banker said, though government banks are under pressure to disburse loans to MSMEs expeditiously, the requirement for working capital amongst MSMEs is very low at the moment. This leads to reluctance on both sides, to lend and to borrow. Therefore, the disbursement is going on at a slow pace.

After unlock 1.0 from June 8, it has been observed that only 30-35 per cent MSMEs have resumed operations, that too at partial capacity, due to Covid-related restrictions. "In such situations, the demand gets muted due to low output in manufacturing units and less numbers of sell orders in the company. So, many of these MSMEs will not dare to apply for loans,” the banker said.

Absence of workforce is also creating problems for MSMEs to get back to normal activity. Market demand for non-essential items are also muted. All this would hamper the progress of the scheme.