Small-value borrowers made up half of Covid’s emergency lending program

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More than half of borrowers who used credit under the government’s emergency credit guarantee program through March 2021 were low-value borrowers.

According to data released by TransUnion CIBIL, 58.5% of borrowers had credit exposure of less than Rs 10 lakh. Borrowers with exposures between Rs 10 lakh and Rs 1 crore made up about 31.7% of all borrowers who used ECLGS loans, the credit reporting company said.

The data relates to borrowers who received financing under ECLGS 1.0 and ECLGS 2.0, which was extended until March 2021. Loans worth Rs 1.7 lakh crore were disbursed under ECLGS 1.0 and ECLGS 2.0, according to TransUnion CIBIL.

While the smaller borrowers outnumbered the larger share of the eligible borrowers in the Rs 10 crore-Rs 25 crore lending compartment benefited from the program. This suggests that medium-sized businesses would have an easier time accessing credit.

Credit bureau data shows that 28.75% of eligible borrowers in the bucket of Rs 10 crore-Rs 25 crore have taken advantage of the program. On the other hand, only 5.18% of eligible people among small borrowers have benefited from the mechanism.

Among the key sectors that benefited from credit under the program, traders accounted for the highest share with 39% in number. Among traders, 90% of those who used credit were retail traders.

Firms in the service sector accounted for 35.8% of borrowers, with transport and other service operators accounting for the largest share of this segment.

Like most financial inclusion and government support programs, public sector banks have also contributed more to ECGLS.

Public sector banks account for 46.8% of all disbursements, followed by private banks at 28.5% and non-bank lenders at 16.4%. The average amount of loans granted by private banks was higher

About 2% of loans granted under ECGLS became non-performing in March 2021.

About 10.04% of these ECGLS counts were marked as special mention counts. Special mention accounts are made up of loans in arrears, but not yet classified as NPA.

Under this program, borrowers were granted a one-year moratorium on principal repayment. As such, a clearer picture of the asset quality of these loans may take some time to emerge.

The sectors that have contributed the most to NPAs are construction, consumer staples, hotels and restaurants, mining, logistics, machinery and transport, education, retail, leather and leather products, according to the report.

The report also assessed the rate used, or the share of eligible borrowers who took out credit under the program, by risk category.

According to this analysis, the rate used was higher at 9.13% for high risk clients, while for medium and low risk the rate used was 7.29% and 8.01% respectively.

High risk clients are those with a credit score between 300 and 680. Low and medium risk clients tend to have scores between 771 and 900, TransUnion CIBIL said.


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