Govt may allow co-op banks to lend under scheme for MSMEs

The government may include cooperative banks as a lending institution under the Emergency Credit Line Guarantee Scheme (ECLGS) that was announced to support stressed micro, small and medium enterprises (MSMEs).

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 Rs. 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 Rs. 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 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 Rs. 1.2 trillion, compared to the target of Rs. 3 trillion, cooperative banks can be allowed to lend under the scheme, Gadkari said.