Pvt lenders beat PSBs in government guaranteed credit


MUMBAI : Public sector banks have lagged behind their private counterparts in disbursing loans under the government-backed credit guarantee program, data from the National Credit Guarantee Trustee Co. Ltd, cited by the Reserve Bank of India (RBI).

“Private banks have shown a greater propensity than public sector banks (PSBs) to use the Emergency Line of Credit Guarantee Program (ECLGS), covering a larger number of beneficiaries,” the regulator said in its report on financial stability.

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As of November 12, private banks had disbursed ??1.06 trillion in government guaranteed loans, while their state-run rivals ??83,000 crore in loans, according to data. Non-bank financial corporations (NBFC) disbursed ??31,000 crore, followed by foreign banks at ??5,000 crores.

“Private banks have a higher share of micro, small and medium-sized enterprises (MSMEs) clients compared to their government-owned peers, and this could be one of the reasons for the higher disbursements by the former,” he said. said Anil Gupta, vice president and head of the sector. (financial sector ratings) at Icra Ltd.

Gupta said another reason is that, compared to public sector banks, private lenders have restructured fewer loans to MSMEs and may have disbursed more ECGLS loans instead. “However, if you look at the data, the average ticket size of ECLGS loans from PSU banks is higher than that of their private peers,” he added.

Small businesses in India have been hit hardest by the pandemic, reducing their ability to repay debts. However, the impact was somewhat mitigated by programs introduced by the government and the regulator’s failure to classify loans as non-performing. However, credit to MSMEs slowed in late September compared to March.

The decline, RBI said, was particularly noticeable in the sub- ??Ticket size 25 crore in major banking groups. While overall MSME exposure in state and private sector banks increased 1.9% from a year ago in September, loans in the sub- ??The 25 crore segment rose a measly 0.28%.

Launched on May 20, 2020, ECLGS offers 100% guarantee coverage to some borrowers, and although it was originally designed for small business borrowers with a total outstanding loan on funds of up to ??25 crore, it now includes other segments as well. The validity of the ECGLS has been extended until March 31 or until guarantees for an amount of ??4,500 billion are issued and disbursements under the program are authorized until June 30, 2022.

Until November 12, banks and non-bank financiers sanctioned loans of ??2.82 trillion, of which ??2.28 trillion has been disbursed, he said. “Analysis of detailed disbursement data shows guarantees of value of up to ??1 crore formed 51% of comprehensive guarantees and 66% of guarantees were issued to MSMEs, ”RBI said.

That aside, there is also some stress building up among smaller borrowers, with data showing an increase in Special Mention 2 (SMA-2) borrowers in September compared to March. According to RBI standards, borrowers should be classified into SMA based on repayment terms.

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