Credit and Finance for MSMEs: Bank credit to micro and small enterprises (MSEs) continued to expand year-on-year (YoY), registering 23.7 per cent growth in June 2022 against a contraction of 0.6 per cent in June 2021, showed latest data by the Reserve Bank of India (RBI) on sectoral deployment of bank credit. The gross bank credit deployed to MSEs in June stood at Rs 14.29 lakh crore vis-a-vis Rs 11.55 lakh crore deployed in June last year and Rs 11.62 lakh crore in June 2020.
In May, the credit growth stood at 27 per cent with Rs 14.23 lakh crore deployed to MSEs, up from Rs 11.20 lakh crore in May 2021. Likewise, a 19.7 per cent jump was recorded in April with Rs 14.08 lakh crore deployed to MSEs in comparison to Rs 11.77 lakh crore in April 2021.
Banks reported healthy YoY credit growth of 60 per cent to medium enterprises as well with Rs 3.63 lakh crore deployed in June this year from Rs 2.26 lakh crore in June 2021. The growth was higher at 64.8 per cent in May 2022 with Rs 3.57 lakh crore deployed in comparison to Rs 2.16 lakh crore during the year-ago period.
Overall bank credit deployed to the entire MSME sector in June was Rs 17.93 lakh crore, marginally up from Rs 17.81 lakh crore deployed in May and Rs 17.63 lakh crore in April. The share of bank credit to MSMEs in India’s gross bank credit of Rs 121.49 lakh crore in June 2022 stood at 14.76 per cent, slightly down from 14.80 per cent in May.
The aggregate credit to MSMEs has been on a revival path since December last year without any significant impact of the third wave of the pandemic after recording negative YoY growth from September to November.
“The upsurge of domestic demand and pick up in ancillary industries and service units has increased funding requirement of this (MSME) sector, which provides employment to a large section of the population,” RBI had noted in its latest Financial Stability Report launched in June this year. The Emergency Credit Line Guarantee Scheme (ECLGS) has played a key role in reviving the MSME sector with loans amounting to Rs 3.32 lakh crore sanctioned till April 30, 2022, of which an amount of Rs 2.54 lakh crore was disbursed, the report had said.
However, the central bank had also noted that the restructured MSME portfolio (worth Rs 46,186 crore) constituting 2.5 per cent of total advances under the May 2021 Resolution Framework 2.0 scheme has the potential to ‘create stress’ in the sector even though the bad assets in the sector had moderated from 11.3 per cent in September 2021 to 9.3 per cent in March 2022.