What the article is about:
- The article talks about increasing bad loans, that weee given to MSMEs during covid pandemic.
Relevance:
- GS3: Mobilisation of resources, Growth and development
Analysis:
- According to latest data furnished by the National Credit guarantee trustee company, out of all the loans given to MSMEs under Emergency Credit Line Guarantee scheme ,16.22 lakh loans have turned bad.
- National Credit guarantee trustee company:
- National Credit Guarantee Trustee Company Limited (NCGTC) is a Union Government Company.
- It is classified as a company limited by shares.
- It was set up by the Government of India to, inter alia, act as a common trustee company to manage and operate various credit guarantee trust funds.
- Emergency Credit Line Guarantee scheme:
- Scheme In Which Government Has Infused Additional Rs 50,000 Crore.
- The ECLGS was announced in May 2020 in wake of the outbreak of COVID-19 to help various sectors, especially in the MSME segment, to get credit at a concessional rate of 7 per cent.
What does this data on bad loans indicate:
- Non- performing assets:
- NPA refers to a classification for loans or advances that are in default or are in arrears on scheduled payments of principal or interest.
- In most cases, debt is classified as non-performing, when the loan payments have not been made for a minimum period of 90 days.
- These numbers suggest that even though the overall economy has surpassed its pre covid level, large part of it continues to be mires in distress.
- It is relatively smaller firms that are under stress and have not been able to meet their obligations.
Conclusion:
- These are “formal” MSMES with access to formal sources of finances, for the informal MSMEs, much larger in number, the financial stress is likely to have been greater as most of the measures announced by government to help MSMEs deal with the fallout of the pandemic,flowed through the formal monetary channels.
