The government is looking to make urban co-operative banks eligible to lend under the Rs 3 lakh crore emergency credit line guarantee scheme (ECLGS) for micro, small and medium businesses (MSMEs), introduced under the government’s atma nirbhar bharat package.
MSME minister Nitin Gadkari said the finance minister will take a decision soon. “The finance minister has explained that due to the dual regulation and supervision, cooperative banks are not included as member lending institutions (MLIs) under ECLGS. However, data regarding their financial position is being collected from scheduled state cooperative banks and urban cooperative banks to include them as MLIs for the scheme, in consultation with Reserve Bank of India (RBI), depending on availability of headroom of the scheme.” Gadkari told attendees at the MSME Conclave organized by FICCI Karnataka State Council.
At present, all public sector and private sector banks and non-banking financial companies (NBFCs) have extended loans under ECLGS.
ECLGS is part of the government’s ₹20-trillion financial package to help the poor and small businesses tide over the COVID-19 crisis, by providing them additional funding of up to ₹3 trillion. “The main objective of the scheme is to provide an incentive to MLIs, that is, banks, financial institutions, and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers, in view of the economic distress caused by the COVID-19 crisis by providing them 100% guarantee for any losses suffered by them due to the non-repayment of the GECL funding by borrowers,” the government had said in May. Since disbursement is only ₹1.2 trillion, compared to the target of ₹3 trillion, cooperative banks can be allowed to lend under the scheme, Gadkari said.
“Cooperative banks that are not included as a member lending institution under the Emergency Credit Line Guarantee Scheme (ECLGS) will be included as lenders for MSMEs, under a scheme being discussed in consultation with the RBI,” a FICCI statement quoted Gadkari as saying.
Cooperative institutions play a crucial role in financial inclusion in both rural and urban India. According to an RBI report, there were 1,551 urban cooperative banks as on 31 March 2018, and 96,612 rural cooperative banks (RCBs) as on 31 March 2017, with RCBs accounting for 65.8% of the total asset size of all cooperative banks.
The minister said as far as the issue of delayed payments to MSMEs is concerned, he has urged all ministries, departments and state-owned companies to clear pending bills of all small businesses within 45 days, and the MSME ministry is closely monitoring all the complaints lodged on the Software Application for Monitoring And Disposal, Handling of Industrial Disputes, or SAMADHAN portal.
