The scheme is the biggest fiscal component of the Rs 20-lakh crore Aatmanirbhar Bharat Abhiyan package announced by Finance Minister Nirmala Sitharaman in May 2020, to mitigate the distress caused by the Covid-19 induced lockdown by providing credit to different sectors, especially MSMEs.

"We estimate almost 13.5 lakh micro, small and medium enterprises (MSMEs) accounts were saved due to ECLGS (including restructured). Almost 93.7 per cent of such accounts are in the micro and small category," SBI Research said in a report.

In absolute terms, the report claimed MSME loan accounts worth Rs 1.8 lakh crore were saved from slipping into NPA during the period and this is equivalent to 14 per cent of the outstanding MSME credit being saved from becoming NPA.

"As per our analysis, if these units had turned non-performing, then 1.5 crore workers would have become unemployed. In effect, the ECLGS saved the livelihood for 6 crore families (assuming four family members per worker including herself)," it said.

Amongst the states, Gujarat has been the biggest beneficiary, followed by Maharashtra, Tamil Nadu and Uttar Pradesh, it said.

Under the scheme, 100 per cent guarantee coverage is being provided by the National Credit Guarantee Trustee Company (NCGTC) for additional funding of up to Rs 4.5 lakh crore to eligible MSMEs and interested Micro Units Development and Refinance Agency (MUDRA) borrowers in the form of a guaranteed emergency credit line (GECL) facility.

For this purpose, a corpus of Rs 41,600 crore was set up by the government, spread over the current and next three financial years.

The report also suggested revamping the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for boosting credit flow to the sector.

Interestingly, CGTMSE portfolio has more than 55 per cent recovery rate, low portfolio delinquency, a low capital requirement but still an unpopular product, it said, adding, conversely, the non CGTMSE portfolio/ collateralised has a 25 per cent recovery rate, high portfolio delinquency implying much higher loan loss provisions with the high capital requirement but still a popular portfolio.

"This could be done by enhancing the scope and role of the current CGTMSE portfolio by setting up an institution that will exclusively administer the CGTMSE along the lines of US Small Business Administration. Given that more than 90 per cent of the units are in the Micro sector, CGTMSE coverage may be made mandatory for all enterprises up to Rs 2 crore," it said.

Despite being in existence for two decades, the report said, coverage of CGTMSE for eligible loans remains abysmally low at sub-10 per cent mostly due to the complexities inherent in the product structure.

This may be due to various issues like higher premium outflows for guarantee obtention and continuance by borrowers, preference by customers to take recourse to asset-backed loans to mitigate the high cost of guarantee, knowledge gap, it said.