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At least 14.6 lakh micro, small and medium enterprises (MSMEs) accounts were saved due to the Emergency Credit Line Guarantee Scheme (ECLGS) launched by the government during the pandemic, thus saving millions of jobs till November, 2022, according to estimates made by a State Bank of India research report.
“In absolute terms, MSME loan accounts worth Rs 2.2 lakh crore have improved since the inception of ECLGS for the entire banking industry. This means that around 12 per cent of the outstanding MSME credit has been saved from slipping into NPA because of the ECLG scheme,” SBI said in a research report.
It said there is clear evidence MSME units are becoming larger with several units crossing the threshold of Rs 250 crores turnover and turning mid-sized corporates by the new definition of MSME units.
“This reveals integration of MSME units with a larger value chain as PLI activity is gaining momentum,” the SBI report said.
With the change in MSME definition, in 2020 the government mandated all the MSMEs to register under the Udyam portal.
The number of GST registration in India is about 1.40 crore whereas the current MSME units registered under Udyam certification is about 1.33 crore.
The government launched Udyam Assist Platform (UAP), developed by SIDBI, to bring all the Informal Micro Enterprises (IMEs) into the formal ambit, which constitute around 99 per cent of the MSMEs in the country, without complex and complicated paperwork
India has less than half the number of MSMEs when compared to China (64 million against 140 million Chinese enterprises).
More than 99 per cent are in the micro category and would need substantial hand-holding to grow organically. This could result in a MSME revolution in India, SBI said.
According to the SBI report, the cluster-based approach of MSME financing is enabling scaling up of the MSME sector through technology upgradation among other things. There is an urgent need to revamp the Credit Guarantee Scheme for the MSME sector. The U.S. Small Business Administration (US-SBA) could be the template for evolving CGTMSE as a friend-philosopher-guide-mentor for MSMEs proliferation, credit linkage, scaling and integration into the value chain, the report said.
The report also advocated phasing out or reducing the annual guarantee fees to 0.50% of the loan amount across all the slabs and making CGTMSE coverage mandatory for all SME loans up to Rs 2 crore. The maximum loan amount for coverage under CGTMSE may be increased from Rs 2 crore to Rs 5 crore for all activities under manufacturing, services and trade sectors, the report said. Guarantee coverage for the units having women promoters should be increased to 100% to give fillip to women entrepreneurship.
It also proposed increasing claims settlement to the extent of 10 times of the guarantee fee paid by the banks and complete end-to-end digital platform to ensure real time sanction, disbursement and claim settlement for the guaranteed portfolio.
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