Falling demand for government guaranteed loans

0
Mumbai: The Emergency Credit Lines Guarantee Program (ECLGS), which was a major driver of loan demand during the first phase of the pandemic, is seeing a decrease in its use. As of July 2, an amount of Rs 2.7 lakh crore was sanctioned under the program. Of this amount, Rs 2.1 lakh crore was disbursed.
The ECGLS aimed to provide unsecured and government guaranteed loans to alleviate the economic distress faced by micro, small and medium enterprises (MSMEs) and other entities due to the lockdowns induced by Covid. The government has extended the scope of ECGLS from time to time through the introduction of ECGLS 2.0, 3.0 and 4.0, and it is valid until September 30, 2021.
In the latest iteration of the ECLGS 4.0 program, the government’s comprehensive guarantee has been increased from loans totaling Rs 3 lakh crore previously to Rs 4.5 lakh crore. In a response to a question from Parliament on Tuesday, the government said that as of July 2, guarantees had been issued for loans made to around 1.1 million MSMEs. According to bankers, eligible borrowers in need of additional funds have already benefited from the loans in the first two rounds. Borrowers don’t want to be watched for distressed loans.
“We have seen the number of applicants drop with each new version of the program,” said one banker. With just two more months on the program, banks don’t expect a surge in demand for government-guaranteed loans. Some believe there might be new borrowing if there is a spike in demand ahead of festival season.


Source link

Share.

Comments are closed.