The government has provided a guarantee cover for non-funded facilities under the second credit guarantee fund for stressed sectors for the first time, Challa Srinivasulu Setty, the managing director of the country’s largest bank said.
Comparing the first and second Emergency Credit Line Guarantee Schemes (ECLGS), Setty told CNBC-TV18 that the move will come to the rescue of the construction sector.
Outlining the key differences between ECLGS 1.0 and ECLGS 2.0, Setty said, “One important thing so far is that NCGTC (national Credit Guarantee Trustee Company), the guarantee provider, first time is providing guarantee for the non-funded exposures because among the 26 sectors which are identified, one of them was construction sector and it was thought that for them the bank guarantee facility would be more important than the fund based facility. So, that is I think in my view one of the most important modification which they have done."
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The SBI MD said the construction sector especially would have specially found it difficult to get additional funding without this guarantee, and therefore stands to benefit the most.
Setty said ECLGS 1.0 cannot be called as unsuccessful. "The fact that Rs 1.5 lakh crore was disbursed in one go; I think that has been an immense success in my view. As a lender I believe that if the facility has been made available (in a timely manner), whatever tweaking we have requested was in terms of implementation issues need not be there." He believes the scheme should not see any implementation issues.
"I believe the scheme was designed in a way where most the vulnerable smaller borrowers of up to Rs 50 crore loans got benefit first before larger players," he said.
With almost Rs 2 lakh crore of the total Rs 3 lakh crores corpus under the scheme already exhausted under ECLGS 1.0, Setty said the fact that less than Rs 1 lakh crore is left to be utilised would not prove to be a limiting factor as some had suggested. "The government has not discussed increasing overall amount under scheme from Rs 3 lakh crore, I am not aware of such discussions," he said.
When asked why the first scheme remained under-utilised and if it was because of risk aversion among banks, he said, "there is no risk aversion among lenders. In fact, lenders have been very proactive under this scheme.”
"I am glad to see that some good MSMEs did not borrow under this scheme, after all it is not free money, and has to be repaid," he said, adding that many borrowers said they could manage without it and may only approach the bank later if needed.
Setty said part of the reason why the restructuring demand remains low is because borrowers are managing with additional funds under the credit guarantee scheme.
"I can definitely say lot of MSMEs who were eligible for restructuring have managed using this facility," he said, adding that the bank was proactively reaching out to customers to make use of the ECLGS and restructuring facilities.
Of its 1.7 million MSME customer, SBI has already restructured loans of 35,000 MSMEs. "Most of the restructuring is happening for loans under Rs 25 crores. As far as corporates are concerned , we don’t see much traction," he said.