Bank credit to small businesses up marginally amid govt’s push; this much amount given in May

Credit and Finance for MSMEs: The growth in bank credit to MSEs had remained contracted since April FY20 till December while the decline was highest in July and August at minus 1.8 per cent.

"The government has chosen the credit and monetary policy route to boost the economic growth rather than the fiscal mode," he said.

Credit and Finance for MSMEs: Gross bank credit growth to micro and small businesses (MSE) in May stood at Rs 10,77,748 crore – 1.5 per cent up from Rs 10,62,270 crore in May 2019, according to the latest data from RBI. This is down from 3.3 per cent year-on-year growth in bank credit worth Rs 11 lakh crore to MSEs in April 2020. Moreover, the amount in May had declined by 6.2 per cent from Rs 11,49,394 crore in March 2020, RBI’s July bulletin showed. The growth had remained contracted since April FY20 till December while the decline was highest in July and August at minus 1.8 per cent. The amount deployed in January 2020 and Rs 10.95 lakh crore in February 2020 up from Rs 10.67 lakh crore in March 2019.

MSEs in manufacturing vertical witnessed contraction of 3.4 per cent in credit deployment from Rs 3,65,307 crore in May 2019 to Rs 3,52,949 crore in May 2020. The decline, in terms of the financial year so far, was minus 7.6 per cent from Rs 3,81,826 in March 2020. However, credit deployment in services MSEs recorded growth of 4 per cent from Rs 6,96,963 crore in May 2019 to Rs 7,24,799 crore in May 2020.

Also read: Only a third of MSMEs looking to benefit from Modi govt’s Atmanirbhar campaign despite awareness

The contraction in the financial year so far in bank credit growth to MSEs has been amid a growing number of small businesses, impacted due to the Covid pandemic, supported under the Emergency Credit Line Guarantee Scheme of Rs 3 lakh crore under Atmanirbhar Bharat campaign. 15,24,691 MSME accounts out of the sanctioned 36,28,444 accounts have been disbursed with Rs 56,091.18 crore as of July 4. This is 1,341 per cent up from Rs 3,892 crore disbursed as of June 1. Public sector banks had contributed majority share of Rs 35,578.48 crore, as per the data tweeted by Sitharaman’s office. The rest was contributed by private sector banks.

Last month, MSME Minister Nitin Gadkari had launched the subordinate debt scheme of Rs 20,000 crore guarantee cover to 2 lakh MSMEs under stress or NPAs as on April 30. The scheme was announced by the Finance Minister Nirmala Sitharaman in May as part of the Rs 20 lakh crore stimulus package. The government would also give Rs 4,000 crore to CGTMSE that will provide partial credit guarantee support to banks for MSME lending.

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