Credit and finance for MSMEs: The rate of growth in bank credit to retail and wholesale trade — brought under the MSME definition last year — more than doubled to 16.9 per cent in August this year from 7 per cent during the year-ago period, showed data from the Reserve Bank of India (RBI). Rs 7.31 lakh crore in aggregate credit was deployed to retail and wholesale trade during the month vis-a-vis Rs 6.26 lakh crore deployed in August last year. The 52 per cent or Rs 3.81 lakh crore of the aggregate loan amount went to wholesale traders (other than those involved in food procurement) while the remaining 48 per cent or Rs 3.50 lakh crore was deployed to retail traders.
The credit deployment to wholesale trade during August was up by 17.6 per cent from Rs 3.24 lakh crore deployed during August last year. For retail trade, the credit growth stood at 16 per cent from Rs 3.01 lakh crore loan deployed in August 2021, showed data from the RBI’s October bulletin released on Monday.
Importantly, the government reinstated retailers and wholesalers in the MSME category in July last year, around four years after they were moved out from the MSME ambit. As per the gazette notification dated June 27, 2017, the retail and wholesale activities were neither manufacturing units nor service units as per the definition of MSMED Act 2008. Hence, they were not able to secure the erstwhile Udyog Aadhaar Memorandum (known as MSME registration).
Subscribe to Financial Express SME newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises
While the surge in credit deployment to two trade categories has been in the backdrop of their inclusion under the MSME definition, the financial distress for traders continue. According to the report by credit rating company CareEdge on Q1 FY23 insolvency cases, the number of cases admitted for Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016 pertaining to wholesale and retail trade jumped 24.8 per cent during the June quarter of the current fiscal from the year-ago period.
The share of the trading sector with 567 cases (from 454 in June 2021) in the total 5,636 insolvency cases during the first quarter of FY23 stood at 10 per cent. The manufacturing sector with 2,232 cases accounted for the highest share at 40 per cent while real estate with 1,160 cases had a 21 per cent share followed by an 11 per cent share of the construction segment with 622 cases.
Also read: SME IPOs seeing substantial activity in sharp contrast to lacklustre main board: RBI