Credit and finance for MSMEs: Data from the Reserve Bank of India (RBI) on sectoral deployment of bank credit in August 2022 collected from 40 scheduled commercial banks showed a 19.6 per cent credit growth in the micro and small enterprise (MSE) sector from a paltry 1.2 per cent in August 2021. Credit deployed during August 2022 stood at Rs 14.49 lakh crore, up from Rs 12.12 lakh crore in August 2021 and Rs 11.98 lakh crore in August 2020. The total bank credit to MSEs in July this year grew 19.2 per cent to Rs 14.41 lakh crore vis-a-vis Rs 12.09 lakh crore a year ago.
Importantly, the year-on-year rate of credit growth has declined from 27 per cent in May and 23.7 per cent in June, indicating that majority of the potential beneficiaries under post-Covid credit schemes by the government such as the Emergency Credit Line Guarantee Scheme (ECLGS) have already tapped into them.
Similarly, the credit growth rate to medium enterprises also dropped to 45.1 per cent in August from 49.1 per cent in July, 60 per cent in June and 64.8 per cent in May. Nonetheless, credit deployed to medium units in August stood at Rs 3.65 lakh crore from Rs 2.52 lakh crore in August 2021, showed RBI data.
On an aggregate level, the bank credit deployed to the MSME sector, combining credit to MSEs and medium enterprises, in August was Rs 18.15 lakh crore, up 24 per cent from Rs 14.64 lakh crore in August 2021. In July Rs 18.08 lakh crore was deployed while during April, May, and June in the current financial year, credit deployed to MSMEs stood at Rs 17.63 lakh crore, Rs 17.81 lakh crore, and Rs 17.93 lakh crore respectively.
This incremental growth in bank credit to MSMEs has seen an increase of Rs 2.7 lakh crores since March 2020 when the pandemic began, out of which ECLGS disbursements have been around Rs 2.36 lakh crore, SBI had noted in its Ecowrap report in July this year.
Meanwhile, the lending potential for MSMEs is expected to reach Rs 3 trillion next year itself based on GST Invoices and bank statements made available on account aggregator and banks adopting OCEN (Open Credit Enablement Network), said India’s Chief Economic Advisor V. Anantha Nageswaran at the Global Fintech Festival (GFF) in September this year.