Gross bank credit deployed to MSMEs under priority sector lending in June stood at Rs 25.31 lakh crore, growing by 14.2 per cent from Rs 22.16 lakh crore in June 2023, according to the latest data on the monthly sectoral deployment by the Reserve Bank of India (RBI).
Priority sector lending involves mandatory lending targets for lenders to ensure that certain sectors of the economy receive adequate credit support in order to boost inclusive growth, reduce regional imbalances, and support marginalized sections of society.
Apart from MSME, the sectors identified by RBI for priority lending are agriculture, export credit, education, housing, social infrastructure, renewable energy, and others based on their social and economic significance.
According to the RBI data, priority credit to micro and small enterprises (MSEs) in the MSME sector grew by 14.2 per cent to Rs 20.20 lakh crore in June this year in comparison to Rs 17.69 lakh crore during the year-ago period.
Credit to medium enterprises also jumped 14.3 per cent to Rs 5.11 lakh crore in June from Rs 44.7 lakh crore in June last year.
Importantly, priority credit to MSMEs in June was 15 per cent of India’s non-food credit at Rs 168.4 lakh crore.
Even as credit to MSMs continues to see an uptick, the growth is likely to slow down this fiscal from the previous year amid moderate growth expected in overall bank credit, said ratings agency Crisil in May this year.
The bank credit growth to MSMEs is estimated at around 15 per cent in FY24 vis-a-vis around 19 per cent in fiscal 2024.
According to Crisil, strong economic activity and retail credit demand drove loan growth last fiscal while it would be tempered in FY25 by “a high base effect, a revision in risk weights and a somewhat lower gross domestic product (GDP) growth.”
To boost credit to MSMEs, Finance Minister Nirmala Sitharaman in this year’s full budget had announced a slew of measures including Rs 100 crore credit guarantee scheme for term loans, credit support for ‘stressed’ MSME accounts, doubling Mudra loan limit to Rs 20 lakh, and more.