Bombay : Public sector banks have lagged behind their private counterparts in disbursing loans under the government-backed credit guarantee scheme, data from the National Credit Guarantee Trustee Co. Ltd cited by the Reserve Bank of India (RBI).
“Private banks showed a greater propensity than public sector banks (PSBs) to use the Emergency Credit Line Guarantee Scheme (ECLGS), covering a larger number of beneficiaries,” the regulator said in its report on financial stability.
As of November 12, private banks had disbursed ₹1.06 trillion in government-backed loans, while their state-run rivals made ₹83,000 crore in loans, according to the data. Non-Bank Financial Corporations (NBFCs) Disbursed ₹31,000 crore, followed by foreign banks at ₹5,000 crore.
“Private banks have a higher share of micro, small and medium-sized enterprises (MSMEs) customers than their state-owned peers, and this could be one of the reasons for higher disbursements from the former,” said Anil Gupta, Vice President and Head of Sector. (financial sector ratings) at Icra Ltd.
Gupta said another reason is that, compared to public sector banks, private lenders restructured fewer loans to MSMEs and perhaps disbursed more ECGLS loans instead. “However, if you look at the data, the average ECLGS loan size of PSU banks is larger than that of their private counterparts,” he added.
Indian small businesses have been hardest hit by the pandemic, reducing their ability to repay debt. However, the impact was somewhat mitigated by the programs put in place by the government and the regulator’s failure to classify loans as non-performing. That said, credit to MSMEs slowed at the end of September compared to March.
The decline, RBI said, was particularly notable in the sub- ₹Note size of 25 crore in major banking groups. While overall MSME exposure in public and private banks increased by 1.9% year-on-year in September, lending in the sub- ₹The 25 crore segment rose a meager 0.28%.
Launched on May 20, 2020, the ECLGS offers 100% guarantee coverage to select borrowers, and although it was originally designed for small business borrowers with total funds-based credit outstanding of up to ₹25 crore, it now includes other segments as well. The validity of the ECLGS has been extended until March 31 or until guarantees for an amount of ₹4.5 trillion is issued and disbursements under the program are authorized until June 30, 2022.
Until November 12, banks and non-bank financiers sanctioned loans of ₹2.82 trillion, of which ₹2.28 trillion has been disbursed, he said. “Analysis of detailed disbursement data shows guarantees worth up to ₹1 crore formed 51% of overall guarantees and 66% of guarantees were issued to MSMEs,” RBI said.
That aside, there is also some stress building up among small borrowers, with data showing an increase in Special Mention 2 (SMA-2) borrowers in September compared to March. According to RBI standards, borrowers should be categorized into SMA based on repayment delays.
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