Credit and finance for MSMEs: The gross bank credit deployed by scheduled commercial banks to micro and small enterprises (MSEs) under priority sector lending in May 2023 stood at Rs 16.17 lakh crore, growing by 14.5 per cent from Rs 14.13 lakh crore during May last year, according to the latest monthly data on sectoral deployment of bank credit by the Reserve Bank of India (RBI). Bank credit to MSEs in May 2022 grew by 25.2 per cent.
In the medium-sized enterprise segment, credit growth was 11.5 per cent in May this year vis-a-vis 53.5 per cent during the year-ago period. Banks deployed Rs 4.02 lakh crore in medium units in May in comparison to Rs 3.61 lakh crore in May last year and Rs 2.35 lakh crore in May 2021.
Overall, Rs 20.20 lakh crore bank credit under priority sector lending — 14.5 per cent of India’s total non-food bank credit worth Rs 138.5 lakh crore — was deployed in the MSME sector in May 2023 in comparison to Rs 19.84 lakh crore – 14.3 per cent of Rs 138.36 lakh crore non-food bank credit deployed in April 2023.
According to a June 2019 report by the UK Sinha Committee constituted by the RBI, an estimated Rs 20-25 lakh crore credit gap existed in the MSME sector while a recent paper by investment banking company Avendus Capital had estimated an astounding credit gap of $530 billion in the MSME sector. Out of over 64 million MSMEs in India, the paper noted that only 14 per cent have access to credit.
Among other sectors eligible for priority sector lending were agriculture and allied activities which were deployed Rs 16.57 lakh crore credit in May 2023, housing sector was deployed Rs 6.22 lakh crore, educational loans Rs 59,466 crore, renewable energy Rs 4,752 crore, social infrastructure Rs 2,607 crore, export credit Rs 12,234 crore, etc.
The MSME portfolio quality for banks was also improved. As per the FY23 data from RBI’s latest financial stability report, banks gross non-performing assets (GNPA) ratio declined from 9.3 per cent in March 2022 to 6.8 per cent in March 2023. The GNPA ratio for MSME loans below Rs 25 crore, which are particularly vulnerable to slippage, also declined sequentially from 7.2 per cent in March last year to 6.7 per cent in March this year, the report noted.