5% ECLGS loans turn into non-performing assets: Financial stability report

Public sector banks credit card NPA at 18%

About 16 per cent of accounts and 5 per cent of the disbursed amount under the emergency credit line guarantee scheme (ECLGS) have turned into non-performing assets (NPAs), according to the latest edition of the Financial Stability Report of the Reserve Bank of India released on Wednesday.

The micro-enterprises segment experienced significant stress, with approximately 20 per cent of borrowers and 10 per cent of the disbursed amount being classified as ‘defaulting’.

During its tenure, the ECLGS, which concluded on March 31, witnessed significant participation from scheduled commercial banks, which accounted for nearly 90 per cent of the total disbursed amount, adding up to approximately Rs 2.91 trillion. Notably, contact-intensive services and traders emerged as the primary sectors availing of ECLGS loans.

The scheme was specifically formulated to mitigate business disruptions caused by the Covid-19 pandemic, with specific focus on supporting micro, small and medium enterprises (MSMEs). It was initially introduced as an emergency credit line of Rs 3 trillion during the Covid-19 lockdown in May 2020.

The ECLGS scheme offered banks and other lenders 100 per cent guarantee coverage through the National Credit Guarantee Trustee Company.

A detailed examination of NPAs on a sector-wise basis indicates that the services and trade sectors, which constituted approximately one-third of the ECLGS disbursements, continue to experience notable strain, the report said.

These sectors accounted for nearly half of the total default cases observed under ECLGS in these specific sectors.

The asset quality of the MSME portfolio of commercial banks, however, improved significantly during 2022-23, with the gross NPA ratio declining from 9.3 per cent in March 2022 to 6.8 per cent in March 2023. The gross NPA ratio for advances below Rs 25 crore, which are particularly vulnerable to slippage, also declined sequentially from 7.2 per cent to 6.7 per cent, the report said.

While there has been an overall improvement in asset quality in respect of personal loans, impairments in the credit card receivables segment have risen marginally, the report said.

According to the latest data, public sector banks had 18 per cent of the credit card receivables turned non-performing as compared to 1.9 per cent of private sector banks.

Overall, credit card gross NPAs were at 2 per cent as of March 31.