Nearly a fifth of the 45 lakh small businesses identified by the government to benefit from a credit guarantee scheme have low credit rankings, and banks should prioritise the remaining 80 per cent while extending loans under the Rs 3 lakh crore package, a study by Transunion Cibil said on Monday.

The Guaranteed Emergency Credit Line (GECL) facility is applicable to all MSME (micro, small and medium enterprises) borrowers with industry-wide aggregate credit exposure of up to Rs 25 crore and industry-wide delinquency less than or equal to 60 days as of February 29, 2020.

The government is targeting to ensure that the MSME sector gets fresh credit of over Rs 3 lakh crore by October 2020 through the scheme as against the Rs 2.8 lakh crore achieved in 2019-20.

The Rs 3 lakh crore package is a significant part of the Rs 20 lakh crore COVID-19 stimulus announced by the government.

As per the government, there are 45 lakh MSMEs in the country who have been identified as eligible for the scheme.

The largest difficulty seems to be in the category classified as “medium”, with 38 per cent of the companies marked out as “sub-prime” borrowers, while the lowest risk seems to be with the “micro” segment which has only 18 per cent of the borrowers in the same segment, it said.

Eligible MSMEs can borrow up to 20 per cent of their aggregate credit exposure. The loans have four-year tenor with the first 12 months of principal covered under moratorium to further assist MSMEs benefitting from the scheme, a statement from Transunion Cibil said.

The credit information company relied on its MSME ranking solution and went into results of it as of February 29 to identify the companies which should be prioritised by banks.