One in six MSME loans under the ECLG program turned into NPAs: Report
One in six loans disbursed under the Emergency Line of Credit Guarantee Scheme (ECLG Scheme) launched during the Covid-19 pandemic have gone bad in the past 27 months. The majority of these loans are below Rs 20 lakh, a report of Indian Express (IE) declared.
The National Credit Guarantee Trustee Company Ltd (NCGTC) said 1.6 million accounts, or 16.4% of the total 9.8 million loans disbursed, turned into non-performing assets (NPA), the report said. . NCGTC was created to handle these loans.
In May 2020, the government announced the ECLG scheme. A two-year moratorium has been authorized for loans under the ECLG. For NBFCs, the interest rate was capped at 14%. The interest rate for other entities was set at 9.25 percent. If they remained unpaid after the moratorium, the loans had to be declared NPA.
However, THAT’S TO SAY quoted a banker saying that if a customer’s loan account goes bad, all of the account holder’s loans are reported as NPA.
Loans under the ECLG program are guaranteed by the government and 75% of the loan amount is immediately disbursed to the bank by the government if the accounts become NPAs. If the money is not recovered, the government pays the 25% to the bank.
A State Bank of India (SBI) report released in January said the ECLGS was crucial to keeping MSMEs afloat.