Credit and finance for MSMEs: The total amount of credit extended to MSMEs in the financial year (FY) 2021-22 by scheduled commercial banks has increased by 24.6 per cent from FY20 and 12.7 per cent from FY21, indicating the rise in credit demand among small businesses fast-tracking their Covid recovery. According to the data from the Reserve Bank of India (RBI) shared by the MSME Minister Narayan Rane in the Rajya Sabha on Monday in a written reply to a question, the credit outstanding to the MSME sector increased from Rs 16.13 lakh crore given to 384.18 lakh borrowers to Rs 17.83 lakh crore to 420.19 lakh borrowers in FY21 and further to Rs 20.11 lakh crore to 264.67 lakh borrowers in FY22.
“To augment the credit facilities, MSMEs are being supported by the ongoing financial assistance schemes of the Ministry of MSME. Some of these include Prime Minister’s Employment Generation Programme (PMEGP) and Credit Guarantee Scheme (CGS) to strengthen the credit delivery system and to facilitate the flow of credit to the micro and small Enterprise sector without the hassles of collateral and third-party guarantee up to a maximum of Rs 200 lakh,” Rane said in his response.
Also read: Rs 14.30 lakh crore bank credit raised by micro, small enterprises in October: RBI data
Among top states in FY22, 26.91 lakh MSMEs in Maharashtra secured maximum credit of Rs 3.39 lakh crore followed by 39.07 lakh MSMEs in Tamil Nadu raising Rs 2.19 lakh crore, and Gujarat with 10.20 lakh MSMEs getting Rs 1.85 lakh crore in bank credit. In Delhi, 4.29 lakh units raised Rs 1.30 lakh crore in FY22.
Meanwhile, the latest RBI data showed Rs 17.99 lakh crore raised by MSMEs under priority sector lending in October 2022, up 20.3 per cent up from Rs 14.95 lakh crore in October 2021 while in September 2022, the total MSME credit deployed was Rs 18.55 lakh crore.
Also read: Repo rate hike to increase interest cost for MSME, retail loans: SBI Ecowrap
However, with the RBI’s monetary policy committee hiking the repo rate, the interest cost for MSME loans may go up, making it relatively difficult for them to secure credit. According to the SBI Research’s Ecowrap report last week, the latest repo rate hike of 35 basis points (bps) and the cumulative hike to 225 bps since May this year, will increase the interest cost for MSME and retail consumers by around Rs 68,625 crore. The MPC had hiked the repo rate by 40 bps in May followed by 50 bps in each of the following three meetings before the current hike to rein in inflation.
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