Credit and finance for MSMEs: Priority sector loans by value deployed to micro and small enterprises (MSEs) by scheduled commercial banks in February 2023 jumped by 13 per cent year-on-year (YoY) vis-a-vis 11.4 per cent YoY growth in February 2022, showed the latest monthly data on sectoral deployment of bank credit by the Reserve Bank of India (RBI). MSEs were deployed Rs 15.61 lakh crore in bank credit in February this year vis-a-vis Rs 13.81 lakh crore in February last year and Rs 15.34 lakh crore in January 2023.
Credit to medium-sized enterprises also recorded growth of 12.4 per cent in February to Rs 3.90 lakh crore from Rs 3.47 lakh crore deployed in February last year. In January 2023, Rs 3.93 lakh crore was deployed to medium units.
Overall, credit deployed by banks to MSEs and medium units in February 2023 stood at Rs 19.52 lakh crore – 14.5 per cent of Rs 134.15 lakh crore non-food bank credit deployed across sectors – with 12.9 per cent growth from Rs 17.28 lakh crore deployed in February 2022.
Among other sectors eligible for priority sectors credit were agriculture and allied activities receiving Rs 16.86 lakh crore, housing receiving Rs 6.19 lakh crore, educational loans Rs 59,362 crore, renewable energy Rs 4,642 crore, social infrastructure Rs 2,449 crore, export credit Rs 14,396 crore, and more in February 2023.
Meanwhile, during the eight-year period from FY15 till FY22, credit to MSME by scheduled commercial banks jumped by 71 per cent from Rs 11.71 lakh crore to Rs 20.11 lakh crore, according to the data shared by the minister of state in the MSME ministry Bhanu Pratap Singh Verma in a written reply to a question in the Lok Sabha last month.
The number of MSME loan accounts, which received credit, grew by 201 per cent from 139.14 lakh in FY15 to 420.19 lakh in FY21 but declined to 264.67 lakh MSMEs in FY22.
Despite growing credit to MSMEs, the gap in credit demand and supply remains significant, as much as $530 billion, according to investment banking firm Avendus Capital. Highlighting this as a critical issue, the RBI’s deputy governor M. Rajeshwar Rao addressing the 31st Annual Management Convention of Thrissur Management Association recently had said that the credit gap to MSMEs has to be seen as an area of opportunity by the banks and other financial institutions.