ECLG scheme helps hinterland MSMEs embark on recovery path

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Mumbai: HDFC Bank’s MSME book grew 30% year-on-year to cross the Rs 2-lakh-crore-mark as of December-end, mainly boosted by the pandemic-induced ECLG scheme under which it disbursed over Rs 23,000 crore.

The growth is also driven by a renewed push towards customers in semi-urban and rural areas, the bank has said.

In December 2019, the bank’s MSME book stood at Rs 1.4 lakh crore, which has grown by over 60,000 crore or 30% to Rs 2,01,758 crore by the December 2020 quarter, becoming the second-largest lender in this segment after the State Bank of India, the bank added.

“Our MSME lending is back to pre-pandemic levels, with loan book growing at 30 per cent year-on to Rs 2,01,758 crore as of the December 2020 quarter,” Sumant Rampal, senior executive vice-president, business banking and healthcare finance, at the bank, said on March 19.

“While the ECLG scheme was the biggest driver boosting the loan book by Rs 23,000 crore disbursed to around 1,10,000 MSME customers, our own renewed push towards customers in semi-urban and rural areas has also helped us during the pandemic, leading to an incremental loan growth of over Rs 60,000 crore,” he said, adding most of the ECLGS disbursals took place only in the past three-four months.

At 30% loan growth, the MSME book is the fastest-growing vertical for the bank.

“This is a testimony to our commitment to strengthen the MSME sector that accounts for about 30% of GDP and the largest employer,” Rampal said.

The government launched the third version of the Rs 3-lakh crore emergency credit line guarantee scheme (ECLGS) last November for MSMEs, following the KV Kamath committee report.

On March 18, Union MSME minister Nitin Gadkari told the Lok Sabha that banks and other financial institutions have cumulatively sanctioned Rs 2.46 lakh crore of the Rs 3 lakh crore scheme, while disbursal stood at low Rs 1.81 lakh crore, as of February 28, according to the data from the National Credit Guarantee Trustee Company, which is the implementing agency of the ECLGS.

The scheme comes with a 2% interest subvention and is a five-year tenor of which the first year gets a payment moratorium.

“Our MSME portfolio is geographically balanced spread across all metropolitan cities, urban, semi-urban and rural regions. And we reached out to them with a suite of customised products which they could access conveniently either through physical or electronic channels,” said Rampal.

The bank offers a range of services to MSMEs, ranging from conventional working capital/term loans, structured cash flow management and financing solutions, trade financing solutions, forex services, individual banking needs of promoters and family, salary accounts plus advisory on investment banking.

Its MSME portfolio is spread across sectors like textiles, fabrication, agri-processing, chemicals, consumer goods, hotels & restaurants, auto components, pharma and the paper industry, and also include the entire selling chain ranging from wholesalers, retailers, distributors, stockists and supermarkets, he said.

On Q4, Rampal refused to share numbers citing the Nasdaq silent period, just saying my team is busy at work and pointed to the large market of 6 crore registered MSMEs, but only 1.2 crore of them borrowing even after all the push by the government and the Reserve Bank.

He said of their 5,500 branches, 1,800 of them have more than 25% of their loans to MSMEs and 4,800 units service this segment of customers. Geographically speaking, the bank is present in 630 districts, of these, 560 districts have MSMEs.

There is no concern on the asset quality front for the bank, which has a history of having the lowest NPAs in the system. In December 2019, the MSME bad loans for the bank were just 0.48% and Rampal said, anyway currently the entire ECLGS book is under mandatory moratorium.

He said, the services industry is still facing challenges and expressed apprehension about the second wave of the pandemic.