Bank credit to micro, small businesses up 5.4% in August from year ago but contracts 3.9% in FY21 so far

By: |
October 13, 2020 7:32 PM

Credit and Finance for MSMEs: There was a contraction of 3.9 per cent in credit deployed to MSEs in August 2020 in the financial year so far. Banks had deployed Rs 11.49 lakh crore as on March 27 to MSEs.

Credit deployment to services MSEs in August 2020 stood at Rs 7.49 lakh crore.

Credit and Finance for MSMEs: Deployment of gross bank credit to micro and small enterprises (MSE) as on August 28, 2020, stood at Rs 11.04 lakh crore – up 5.4 per cent from Rs 10.48 lakh crore as on August 30, 2019, and marginally by 0.35 per cent from Rs 11 lakh crore as on July 31, 2020, according to the RBI’s August bulletin. However, there was a contraction of 3.9 per cent in credit deployed in August 2020 in the financial year so far. Banks lent Rs 11.49 lakh crore as on March 27 to MSEs. The deployment in July was 5.1 per cent up from Rs 10.47 lakh crore in July 2019 while in June, bank credit was 6.5 per cent more to Rs 11.32 lakh crore from Rs 10.62 lakh crore in the year-ago period.

Even as the overall credit deployment stayed in green, lending to manufacturing MSEs remained in the red. The decline for the month of August 2020 was minus 1.2 per cent to Rs 3.54 lakh crore from Rs 3.58 lakh crore in August 2019 while the contraction in the financial year till August stood was minus 7.1 per cent. The deployment in July 2020 was at minus 1.9 per cent to Rs 3.54 lakh crore from Rs 3.61 lakh crore in July 2019.

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However, credit deployment in services MSEs in August 2020 worth Rs 7.49 lakh crore continued to be positive at 8.8 per cent from Rs 3.58 lakh crore from the year-ago period. For July 2020, bank credit stood at Rs 7.45 lakh crore — 8.7 per cent more from Rs 6.85 lakh crore in the year-ago period. However, it fell from 11.9 per cent year-on-year growth in June 2020 at Rs 7.79 lakh crore. Moreover, the deployment in services MSEs declined by minus 2.3 per cent from Rs 7.67 lakh crore in March 2020.

Meanwhile, credit disbursement to MSMEs under the Modi government’s Emergency Credit Line Guarantee Scheme (ECLGS) as on October 5, 2020, stood at Rs 1,36,140 crore to around 27 lakh MSMEs till October 5, according to the data shared by the Finance Ministry in a tweet on October 8. The total loans sanctioned by banks was worth Rs 1,87,579 crore to 50.7 lakh business units as per the Rs 3-lakh crore scheme focused on Covid-hit MSMEs and other businesses.

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