Bank credit to micro, small businesses up over 6% in December from year-ago amid Covid, shows RBI data

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Updated: Mar 02, 2021 3:39 PM

Credit and Finance for MSMEs: MSME sector accounted for a share of around 18 per cent in the total credit to the industry and around 5 per cent in the total non-food credit extended by the scheduled commercial banks.

This is a challenge for MSMEs, more so for micro and tiny sectors, since creating an inhouse lab and its maintenance, personnel, equipment, consumables and all, requires investment.Emergency Credit Line Guarantee Scheme (ECLGS) and the subordinate debt scheme were the key post-Covid credit measures taken by the government to support pandemic-hit small businesses.

Credit and Finance for MSMEs: Gross bank credit deployed to micro and small enterprises (MSEs) in December 2020 has increased 6.6 per cent to Rs 11.31 lakh crore from Rs 10.61 lakh crore during the year-ago period. The December year-on-year (YoY) credit growth to MSEs was also up from 6.1 per cent YoY growth in November 2020, according to the data from the Reserve Bank of India (RBI). Banks had deployed Rs 11.22 lakh crore to MSEs in November down from Rs 11.25 lakh crore in October. However, the December credit growth continued to remain contracted by minus 1.5 per cent in the financial year 2020-21 so far even as it improved from November’s minus 2.4 per cent growth and minus 2.1 per cent growth in October in FY21. As of March 27, 2020, bank credit to MSEs stood at Rs 11.49 lakh crore, data from RBI’s February bulletin showed.

MSME sector accounted for a share of around 18 per cent in the total credit to the industry and around 5 per cent in the total non-food credit extended by the scheduled commercial banks in November 2020, as per RBI data. Credit growth to MSMEs, which has generally remained subdued in the recent years, received a further setback due to the pandemic. “However, there has been a turnaround in credit to this sector in the recent months mainly due to a sharp increase in credit extended to the medium industries. Owing to the sharp increase in credit growth to medium industries, the overall credit to MSMEs in November 2020 accelerated to 5.0 per cent as compared to a contraction of 0.6 per cent a year ago,” the bulletin said. Medium industry’s credit deployed in December was Rs 1.23 lakh crore, up 15.3 per cent from Rs 1.07 lakh crore in December 2019. Emergency Credit Line Guarantee Scheme (ECLGS) and the subordinate debt scheme were the key post-Covid credit measures taken by the government to support pandemic-hit small businesses.

Also read: GeM: Share of MSE sellers on Amazon of govt buying more than doubles in 12 months; total MSE count up 7X

December also saw continued growth in credit deployment to MSEs in the manufacturing sector from October and November after being in red from April till September in the financial year. The outstanding as of December 18, 2020, for manufacturing MSEs was Rs 3.69 lakh crore, up 1.2 per cent from Rs 3.65 lakh crore as of December 20, 2019. The November and October YoY growth stood at 0.5 per cent and 0.7 per cent respectively. The growth had remained contracted by minus 2.2 per cent, minus 3.4 per cent, minus 3.7 per cent, minus 1.9 per cent, minus 1.2 per cent, and minus 0.1 per cent during April, May, June, July, August, and September, respectively.

Credit growth for MSEs in the services sector also remained positive in December. From 10.2 per cent YoY growth in September, 10 per cent in October, and 9.1 per cent in November, services MSEs saw deployment up by 9.4 per cent in December 2020 worth Rs 7.61 lakh crore vis-à-vis Rs 6.96 lakh crore in December 2019. However, the growth in FY21 till December remained contracted at minus 0.7 per cent from Rs 7.67 lakh crore in March 2020.

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