The downturn in the economy following the Covid pandemic over the past two years appears to have hit micro, small and medium-sized enterprises (MSMEs) the most despite a host of loan restructuring schemes and plans announced by the Reserve Bank of India (RBI) and the government.

Gross Non-Performing Assets (GNAs) of MSMEs, or defaulted loans of these firms, increased by Rs 20,000 crore to Rs 1,65,732 crore in September 2021 from Rs 1,45,673 crore in September 2020, the RBI said. in response to a Right to Know (RTI) request by The Indian Express.

According to the RBI, bad debts of MSMEs now represent 9.6% of gross advances of Rs 17.33 lakh crore compared to 8.2% in September 2020. In fact, bad debts of MSMEs had decreased by Rs 1,47,260 crore (8.8% advances) in September 2019, to resume in 2021.

Public sector banks accounted for the bulk of NPA MSMEs at Rs 1,37,087 crore, according to the RBI. Among state-owned banks, PNB had NPAs for MSMEs of Rs 25,893 crore in September 2021, followed by State Bank of India of Rs 24,394 crore, Union Bank of Rs 22,297 crore and Canara Bank of Rs 15,299 crore, according to the RBI.

According to the RBI, MSME bad loans now account for 9.6% of gross advances of Rs 17.33 lakh crore from 8.2% in September 2020.

A loan becomes a non-performing asset when either principal or interest is past due after 90 days.

The increase in bad loans occurred even after the RBI announced four loan restructuring programs for MSMEs in January 2019, February 2020, August 2020 and May 2021. Loans of up to 24.51 lakh of MSME accounts worth Rs 1,16,332 crore were restructured under these schemes. . Under the May 2021 circular issued by the RBI, loans of Rs 51,467 crore were restructured, according to the RBI’s ‘Banking Trends and Progress’ report.

According to the definition of RBI, the investment of a micro unit should not exceed Rs one crore and the turnover Rs 5 crore, the investment of small units should not exceed Rs 10 crore and the turnover of ‘business Rs 50 crore and the investment of a medium enterprise should not exceed Rs 50 crore and a turnover of Rs 250 crore.

The MSME sector was among the sectors most affected by the pandemic. Thousands of MSMEs closed or fell ill after the government announced a nationwide strict lockdown in March 2020 following the Covid pandemic. To revive activity, the RBI and the government have introduced several measures including the Emergency Line of Credit Guarantee Scheme (ECLGS), which has provided Rs 3 lakh crore in unsecured loans to MSMEs and businesses. The RBI also extended the one-time MSME loan restructuring program without downgrading of asset classification and allowed bank loans to NBFCs (other than MFIs) for on-lending to agriculture, MSMEs and housing to be downgraded. as Priority Sector Loans (PSL ).

Banking sources said the restructuring plans and packages did not benefit thousands of units that were already in default. Indeed, to be eligible for the ECLGS system, borrowing accounts had to be less than or equal to 60 days due on February 29, 2020.

According to the RBI’s Financial Stability Report, credit to the MSME segment slowed (year-on-year) at the end of September 2021 compared to March 2021. The decline was particularly visible in the lower note size at Rs 25 crore in major banking groups.

Under the ECLGS, loans amounting to Rs 2.82 lakh crore have been sanctioned till November 12, 2021, of which Rs 2.28 lakh crore has been disbursed (Rs 1.94 lakh crore by commercial banks, forming 20.6% of additional credit during the period), he mentioned.