Bank credit to MSMEs under priority sector lending in October surged by 13.9 per cent to Rs 26.34 lakh crore from Rs 23.11 lakh crore in October 2023, according to the latest data by the Reserve Bank of India (RBI) on the deployment of gross bank credit across major sectors. The credit deployment to MSMEs in October was 15.7 per cent of India’s non-food credit of Rs 167 lakh crore, marginally up from 15.5 per cent in October last year.
Priority credit to micro and small enterprises (MSEs) in the MSME sector increased by 12.3 per cent to Rs 20.76 lakh crore in October this year from Rs 18.49 lakh crore in October 2023. Similarly, credit to medium enterprises jumped by 20.8 per cent to Rs 5.57 lakh crore from Rs 4.61 lakh crore.
Credit to MSMEs is likely to grow further with the upcoming credit assessment model by banks based on the digital footprint of MSMEs, moving away from the traditional method of underwriting MSME loans based on asset or turnover.
Finance Minister Nirmala Sitharaman at an event in November had noted that Rs 100 crore credit guarantee scheme for MSMEs announced in the budget will soon be placed before the Union Cabinet for approval, ANI had reported. “Immediately after getting approval from the cabinet, the scheme that will provide guarantee through MSME ministry and banks will be implemented,” Sitharaman had said.
The minister, at a separate event in November, had also asked banks to target lending Rs 6.12 lakh crore to MSMEs in the financial year 2025-26 and Rs 7 lakh crore in FY27.
For better credit access, Reserve Bank of India (RBI) Deputy Governor Swaminathan J also last month had urged MSMEs to formalise their businesses, strive for credit discipline and invest in capacity building for better access to finance and improving financial health.