More than 2.62 lakh applications for loans worth Rs 1.71 lakh crore have been received under the government’s Emergency Credit Line Guarantee Scheme 5.0 (ECLGS 5.0), launched last month to tackle the stress being faced by Micro, Small, and Medium Enterprises (MSMEs) and the aviation sector as a result of the ongoing West Asia conflict. A finance ministry official said on Monday that around three-fourth of applications have come from MSMEs.

The Rs 2.55-lakh crore scheme, announced on May 5 in response to the continued war in West Asia, lets banks give additional loans worth up to 20% of the existing working capital limits of borrowers. For MSMEs, 100% of the additional credit is guaranteed by the government through the National Credit Guarantee Trustee Company Limited (NCGTC), with non-MSMEs getting a guarantee of 90%.

Manoj Muttathil Ayyappan, a Joint Secretary in the Ministry of Finance, told reporters that of the 2,62,800 applications worth Rs 1.71 lakh crore that had been received and money for almost 80,000 applications has already been sanctioned. This sanctioned amount is equal to Rs 35,194 crore, while guarantees worth Rs 15,720 crore have been issued.

“This entire process has been digital involving the JanSamarth team. End to end, the process can be completed in 5-7 days,” Ayyappan said. Noting the rapid pace with which applications had come in and loans sanctioned, Ayyappan said this was down to the outreach programmes as well as the quick implementation of the scheme. Around 10 outreach programmes have been planned, with five of them already completed.

“Most of the time, it is also a question of customers applying for it and keeping it so that they don’t miss out on the scheme rather than (any) immediate requirement,” he said, further adding that there wasn’t any industry concentration in the applications that had been received.

“The MSME segment is around 75-76% of the applications that have come in, which is in line with our expectations; we expect that should be about 80% of the total. Of the around Rs 2.5 lakh crore, approximately Rs 2 lakh crore should come from MSME sector is our expectation,” he said.

Started during the Covid pandemic, the latest version of the credit guarantee scheme includes a specific carve-out of Rs 5,000 crore for the aviation sector. It has an estimated outlay of Rs 18,000 crore, which is the cost to the government for providing the credit guarantees.

In response to a question about the build-up of stress in the MSME sector, Ayyappan said that latest available data for the January-March quarter did not show any such deterioration in asset quality.

“Regarding NPAs, the latest available data is for the March quarter, which has been a very good quarter. And we have not seen any reports where the stress is increasing just because of the West Asia crisis. So, I don’t think there will be any immediate challenge on that front,” the finance ministry official said.