Bank credit deployed by scheduled commercial banks under priority sector lending to micro, small and medium enterprises (MSMEs) increased by 14.8 per cent in August this year from the year-ago period, according to the latest data on sectoral deployment on Reserve Bank of India (RBI) on Monday. Priority credit to MSMEs in August increased to Rs 25.5 lakh crore from Rs 22.2 lakh crore in August 2023.
Within the MSME segment, credit to micro and small enterprises (MSEs) increased by 13.5 per cent to Rs 20.2 lakh crore in August from Rs 17.8 lakh crore in August 2023. Likewise, credit to medium enterprises jumped 20.8 per cent to Rs 5.29 lakh crore from Rs 4.38 lakh crore during the said period.
In the current financial year, priority credit to the MSME sector grew 3.7 per cent from Rs 24.6 lakh crore deployed in March 2024. Credit growth was 2.7 per cent in the MSE segment and 7.9 per cent in the medium enterprise segment since March this year.
However, bank credit growth to MSMEs in the current financial year is likely to slow down from the previous year amid moderate growth expected in overall bank credit, Crisil had said earlier this year.
The growth is estimated to be around 15 per cent in the current fiscal, down from a robust around 19 per cent in fiscal 2024.
Importantly, RBI’s Governor Shaktikanta in August this year at an event had said that the upcoming Unified Lending Interface (ULI) platform by the central bank will aim at “enabling frictionless credit” to various sectors, particularly MSMEs and agri. The platform is likely to come out of beta soon.
The finance demand for MSMEs in the country is around $1,955 billion ($1.9 trillion), of which debt-based demand is estimated at $1,544 billion ($1.5 trillion), RBI’s Deputy Governor Michael Debabrata Patra had informed at a CII event earlier this month.
Half of this debt demand comes from borrowers who prefer financing from informal sources or from financially unviable enterprises. This leaves a debt demand of $819 billion by MSMEs, of which $289 billion demand is currently fulfilled by formal credit lenders like banks, Patra had said.