Govt Eyes Pandemic-era credit scheme to help firms again

Copyright © HT Digital Streams Limit all rights reserved. The modified ECLGs will provide lower interest rates to push manufacturing in electronics, medical devices and defensive production. Summary The idea is to support not only major manufacturers, but also small businesses that have financing restrictions in an uncertain global economic environment. New Delhi: In a move aimed at pushing manufacturing and exports, the center examines the launch of an extensive version of the Emergency Credit Line warranty scheme (ECLGS)-which expanded the pandemic-induced scheme amid the current uncertain worldwide climate. The proposal is part of a broader attempt to facilitate financing for manufacturers, especially those corresponding to the Atmanirbhar Bharat scheme, four people who are familiar with the case told Mint. The plan includes improving credit flow to the collateral free credit guarantee fund trust for Micro and Small Enterprises (CGTMSE), which provides measures for units approved under the Production Linked Incentive (PLI) scheme. It will also expand cluster-based financing to support emerging manufacturing centers. The idea is to support not only major manufacturers, but also small businesses that have financing restrictions in an uncertain global economic environment. “The revival of a calibrated ECLGS-type scheme is considered for critical sectors that are linked capital intensive or exports but are still credit hungry,” one of the four people mentioned above. “At the same time, we look at ways to make credit guarantees more seamless under CGTMSE and expand support to the beneficiaries of the high potential,” this person added. Read also | Regulator receives 1,000 applications from MSME drugs on compliance with good manufacturing practices The modified ECLGs offer lower interest rates to push manufacturing in electronics, medical devices and defensive production, which is part of the PLI framework, added this person. The government’s attempt is to facilitate access to working capital and long -term financing for both major manufacturers and MSMEs, which still face financing restrictions. The emergency credit guarantee scheme, which was launched during the Pandemic as part of the Atmanirbhar Bharat package in May 2020, is designed to be eligible to eligible, which is being resumed and resumed the activities disrupted by Covid-19. It ended on March 31, 2023. From that date, nearly 12 million guarantees amounting to £ 3.65 trillion were issued under the scheme. Of these, MSMEs received 11 million guarantees totaling £ 2,41 billion. According to a report by the State Bank of India (SBI) published on January 23, 2023, almost 1.46 million MSME accounts were saved as a result of the scheme for the scheme, including restructured accounts. About 98.3% of these belonged to micro and small businesses. “The average loan approved under the ongoing CGTMSE scheme, which was around £ 11.76 lakh, is now around £ 22 Lakh, which is far from sufficient for an MSME aimed at entering the export market. Export-oriented units require a much higher credit flow, and the CGTMS cover has come to a hedgehog. 1 Crore, which defeats the goal, “says Vinod Kumar, president of India Smo Forum. While exporters worldwide are raising funds at 2% to 3.5%, Indian exporters often borrow at 10% or more – which the US unexplored in the global markets, Kumar said. The new measures do not follow a one-size-fits-all model, but rather focus on providing specific sectors that need it most. “At present, the economic situation requires targeted support – especially for sectors linked to exports, or those under the PLI scheme, which can grow faster and deliver better returns if they get financing on time,” the second person said. Read it | MSMEs ask for recreation in the new FEMA regulations for export and imports under the existing CGTMSE scheme. The government offers collateral loans of up to £ 5 to MSMEs, with a guaranteed coverage of up to 85%. “It is now proposed to increase the credit guarantee coverage to 90% for selected manufacturing sectors and to lower msme’s warranty fees, especially those corresponding to the most important industrial and export-linked initiatives,” a third person said. “The contours of these proposals are expected to be discussed among the finance, trade and industry and MSMEs ministries to build consensus,” the third person added. “The goal is to expand coverage, increase financial expenses, support manufacturing and use export opportunities.” Inquiries sent to the three ministries remained unanswered at the time of printing. The sectors focused for improved credit include toy manufacturing, textiles and garments, engineering goods, auto parts, electronics and electrical equipment, marine products, jewelery and jewelry, leather and shoes, pharmaceutical products and agricultural products. The focus is on increasing the export of high demand goods and diversifying export destinations worldwide, instead of relying only on traditional markets. Read it | India’s motorcycle parts import the boom, the import drops as the domestic industry becomes stronger due to the PLI scheme “Customized loan products discussed for PLI units include working-capital support linked to production cycles, long-term financing, and front-ship credit lines, especially in sectors such as electronics, pharmaceuticals, Person. In January this year, the government took a step to help MSMEs by requiring a 45 -day payment rule to improve cash flow and limit the delayed payments to small businesses. MSMEs contribute about 45% of the total exports of India, playing a key role in sectors such as textiles, engineering goods, pharmaceuticals and jewelry and jewelry. On January 31, 2025, the total number of MSMEs registered on the Udyam Registration Portal and Udyam Assist platform was almost 59 million, while between July 1, 2020 and 31 January 2025 71.178 units were deregistered for closing. The data also indicates that 203 million people work in MSMEs on July 16, 2024. Recently, the government also doubled the guarantee coverage under its credit guarantee scheme for Startups (CGSS), which increases the limit per lender from £ 10 crore to £ 20, a move aimed at relieving credit access for startups and promoting innovation in priority sectors, as reported on May 9. “Improving credit limits under key manufacturing schemes, including the PLI, shows the government’s proactive approach to addressing financial restrictions and accelerating industrial growth,” says Shridhar Kamath, partner and leader for engineering and industrial products at Grant Thornton Bharat. “These initiatives can generate employment, formalize more businesses and increase exports by breathing new life into emphasized units. Challenges such as potential credit abuse, too much leverage and careful lending by banks cannot be overlooked. added. The Union budget 2025-26 assigned £ 23,168.15 crore to micro and small businesses, of £ 17,306.70 crore in the revised estimate for FY25, focusing on startups and export-oriented MSMEs. News reports and latest news updates on live mint.