Credit and finance for MSMEs: This comes after ECGC’s announcement last week on expanding the 90 per cent insurance cover to exporters with a credit limit of Rs 50 crore from earlier for exporters with the Rs 20 crore limit.
Credit and finance for MSMEs: Commerce Minister Piyush Goyal has asked bankers to ensure MSME exporters get access to affordable credit in order for the country to achieve its $1 trillion merchandise exports target by 2030. Goyal met export promotion body Export Credit Guarantee Corporation of India (ECGC) and 21 banks including the State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Central Bank of India on Wednesday in a meeting convened by the Department of Commerce.
This comes after ECGC’s announcement last week on expanding the 90 per cent insurance cover to exporters with a credit limit of Rs 50 crore from earlier for exporters with the Rs 20 crore limit. So far, four banks viz., State Bank of India (SBI), Central Bank of India (CBI), Bank of Maharashtra and Saraswat Bank have opted for the enhanced cover which is expected to benefit around 3,000 exporters borrowing funds under the scheme.
The scheme is also expected to be offered to nine additional banks provided they extend the export credit at an interest rate corresponding to the accounts rated ‘AA’ or with an equivalent rating.
However, Goyal noted that ECGC can even look at extending the scheme to all the banks, instead of the proposed nine banks, so that the export credit offtake for the MSME exporters can be increased.
ECGC chairman and managing director M. Senthilnathan in a presentation during the meeting noted that based on ECGC’s experience under the scheme of enhanced cover, it has “proposed further modifications” to make available adequate and affordable credit to a larger section of MSME exporters.
During the meeting, bankers requested that ECGC should adopt a claim processing method similar to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). On this, Goyal advised ECGC to “follow a pattern on similar lines” to compensate their loss. The minister also advised ECGC to examine 75 per cent of claim payments to banks under the ECIB (export credit insurance for banks) scheme within 45 days of receiving the claim. The scheme protects banks against losses they may suffer while granting post-shipment credit to exporters.
The export of MSME-related goods increased to $189,768 million during FY22 from $143,823 million during FY21, registering a positive growth of 31.9 per cent, according to the government data. During April-December FY23, the value stood at $147,060 million (43.7 per cent share in India’s total exports) as compared to $138,922 million during the year-ago period (with 45.5 per cent share in total exports), registering a growth of 5.9 per cent.