Banks have so far lent 90 per cent of the Rs 3 lakh crore under emergency credit line guarantee scheme announced last year to help small businesses tide over the pandemic, according to a report by Crisil. On Monday, the government expanded the emergency credit line guarantee scheme (ECLGS) by another Rs 1.5 lakh crore, which feels will help alleviate the potential stress on asset quality of banks arising from the second wave of the pandemic.

Disbursements under the existing ECLGS have already reached Rs 2.69 lakh crore of the total corpus of Rs 3 lakh crore, which is 89.7 per cent, benefiting almost 10 per cent of the value of banking sector advances and over 60 per cent value of advances to micro, small and medium enterprises, Crisil said in a note on Tuesday.

This, coupled with other steps like loan moratorium and loan resolution framework, has helped contain banks’ gross non-performing assets at 7.5 per cent in March 2021, down from 8.2 per cent in March 2020, the agency said.

Even micro, small and medium businesses, which bore the brunt of the pandemic on their cash flows saw gross NPAs increase by only less than 100 basis points, it noted.

On the Rs 7,500 crore credit guarantee scheme announced for loans given to micro finance institutions for on-lending, Crisil said it will enhance funding access for the microlenders, and also ensure increased credit flow to their small borrowers as they were unable to borrow from other avenues in the formal financial ecosystem.

Expanding ECLGS by Rs 1.5 lakh crore will provide the much-needed support to vulnerable segments of the economy, particularly small and mid-sized companies, to tide over the current crisis.