Credit and finance for MSMEs: The year-on-year overall bank credit growth since December 2020 improved due to the normalisation of the Indian economy post covid, pent-up demand, and policy support from the government including the Emergency Credit Line Guarantee Scheme (ECLGS) to MSMEs, production-linked incentive scheme, etc., noted rating agency CareEdge Ratings. The credit growth jumped from 6.1 per cent with Rs 104 lakh crore as of December 2020 to 9.1 per cent (Rs 116.8 lakh crore) as of December 2021, and 17.5 per cent (Rs 131.1 lakh crore) as of December 2, 2022, the agency said in its latest credit report.

“It (credit growth) expanded by over 1,000 bps due to a low base, retail credit, inflation-led working capital requirement and MSMEs,” the report noted. 

Also read: Rs 14.30 lakh crore bank credit raised by micro, small enterprises in October: RBI data

According to the latest data on credit to MSMEs by the Reserve Bank of India, Rs 17.99 lakh crore were extended to MSMEs in October 2022, up 20.3 per cent from Rs 14.95 lakh crore in October 2021 while in September 2022, the total MSME credit deployed was Rs 18.55 lakh crore. Importantly, among sectors eligible for PSL, credit to MSMEs was highest followed by Rs 16.23 lakh crore to agriculture and allied activities, Rs 13.37 lakh crore to weaker sections, Rs 6.31 lakh crore to housing, etc.

Also read: 16-18% MSME credit growth likely this fiscal and next vis-a-vis 10-12% growth in corporate credit: Crisil

Importantly, the bank credit to MSMEs in FY23 and FY24 as well is expected to grow at a “reasonable clip” of 16-18 per cent given the MSMEs’ role in Atmanirbhar Bharat initiative and the flow-through impact of schemes such as the Productivity Linked Incentive (PLI) scheme should sustain credit demand, credit rating agency Crisil had said in a report in November. The compound annual growth rate (CAGR) in bank credit to MSMEs during the 2019-22 period was 12 per cent in comparison to a mere 3 per cent for corporate credit while credit growth in FY23 and FY24 will be higher than the 10-12 per cent growth expected in credit to the corporate segment during the two fiscals.

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