Micro, small and medium enterprises (MSMEs) believe that as the demand for credit has been growing, the eligibility criteria under the Emergency Credit Line Guarantee Scheme (ECLGS) has been restrictive, leading to a gap.
One-third of the Centre's Rs 3 lakh crore ECLGS for MSMEs remained unutilised till November 12, following which the government decided to extend the scheme till March 31, 2021 and expand it to more sectors under ECLGS 2.0.
In Karnataka, the numbers were slightly better than the national figures, with 75 percent or Rs 8,029 crore of the eligible amount of Rs 10,695 crore under the ECLGS 1.0 scheme sanctioned as of October 30, though only 62.28 percent of the total amount had been disbursed.
Of the total 3 lakh eligible accounts, 1.46 lakh had received the amount, as per data from the state industries departments.
In the Peenya Industrial area, where 10,000 MSMEs manufacture everything from automobile parts to aerospace units, the benefits of ECLGS scheme and even the subordinate debt scheme under the Atmanirbhar Bharat package haven’t trickled down to many.
In fact, according to the Peenya Industrial Association, only 15 percent of the MSMEs in the area are eligible for the ECLGS 1.0, while none have availed the subordinate debt scheme.
Ramesha CS, proprietor of Sunrise Technologies, a manufacturing unit which makes engineering precision equipment and auto components, says that he wanted a credit line to revive the business, but was rejected under the ECLGS scheme because of an outstanding of over 60 days.
THE ECLGS scheme 1.0 is applicable only to those who have outstanding up to 60 days . This, MSMEs say, has been the biggest limiting factor.
"Because of the global slowdown, auto and OEMs were affected, and then the pandemic struck. We lost six months of production due to lack of working capital and employee turnover. We approached the bank for getting credit under ECLGS. We have four term loans and one OD, and only one is over 60 days, that's why I was not eligible," said Ramesha CS, proprietor, Sunrise Technologies
"From October we have been getting orders but we don't have manpower. We are running at 50 percent capacity. If I had got ECLGS, I would have used it for raw material," he added.
For companies like Sunrise who had outstanding of over 60 days, a subordinate debt scheme for stressed and NPA accounts is also available under the Aatmanirbhar Bharat package. However, the prequalification to restructure existing debt, which would affect the credit score of the company, makes it less lucrative. Companies say even the credit sanctions are limited.
Industry members are calling for schemes that are viable for the distressed situation of MSMEs.
"The policymaker doesn't have the information of ground reality of the budget required for small scale industries. 15 percent of the 10,000 MSMEs are eligible for ECLGS. The criteria is not in favour of small scale industries," said Prakash C, President, Peenya Industries Association
"As an association, we request banks and government to extend this facility to SMA-2 accounts (accounts with outstanding between 60-90 days). Stressed accounts are in need of this money but banks are very strict because of the central guidelines," he added.
The banking and financial sector, however, feels the guidelines work, since the aim of the scheme was only to help those impacted by the COVID pandemic, and not those that were already stressed.
"The whole bunch of initiatives from Aatmanirbhar 1 has been to take care of the current situation. Those who were stressed or in default prior to COVID, these schemes are not for them. This is to take into account that things were going well but COVID slowed them down, and that's why government is focused on getting them out of them," Sanjiv Bajaj, CMD, Bajaj Finserve, said during a recent panel on CNBC-TV18.
But even for many who are eligible, the process has not been without hurdles. Kanthraju S, proprietor of this factory that manufactures packaging boxes received Rs 8 lakh as emergency credit line under the scheme, but only after being rejected four times and after a recommendation from the state's Small Scale Industries Association.
"I went to the bank in June but they told us we are not eligible for the scheme. They said CIBIL score is not good. We then went to Karnataka Small Scale Industries Association, got a letter and gave it to the bank. We finally got Rs 8 lakh at the end of October," said Kanthraju S., proprietor, Maruthi Punch Pack.
"I wanted to use the credit line for restarting factory , raw material, workers salaries, and for paying bills," he added.
As the economy recovers, these MSMEs are seeing an uptick in orders and are hoping to access more working capital. Their only ask is that the government ensures that its schemes match the ground reality.