Credit growth to small businesses continue to remain flat in FY20 so far; check what RBI data shows

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Published: January 13, 2020 2:01 PM

Credit and Finance for MSMEs: The growth in gross bank credit to micro and small enterprises (MSE) remained contracted for November 2019 as well in the current financial year.

The manufacturing MSEs saw a higher contraction of 3.4 per cent since April this FY.

Credit and Finance for MSMEs: The growth in gross bank credit to micro and small enterprises (MSE) remained contracted for November 2019 as well in the current financial year, data from the Reserve Bank of India showed. From minus 0.1 per cent in April, growth in credit deployment to MSEs has remained negative throughout FY20 till November during which the contraction was 0.9 per cent. For both July and August months, the negative credit growth was the highest at minus 1.8 per cent in the FY. The November bank credit stood at Rs 10.57 lakh crore — 6.2 per cent up from Rs 9.95 lakh crore November FY19. The amount for October FY20 was Rs 10.53 lakh crore, according to RBI’s January 2020 bulletin. The credit outstanding as on March 29, 2019, was Rs 10.67 lakh crore.

Even with respect to the year-over-year (YoY) growth in credit during FY20 till November, the percentage of amount has declined gradually. From 11.9 per cent YoY credit growth between April FY19 and April FY20, the fall has been 11 per cent YoY for June, 7.8 per cent YoY for July, and 5.8 per cent YoY for October. However, it increased to 6.2 per cent for November. “Bankers in India are not aware of businesses’ details or exposed to the sector’s intricacies. They only care about seeking collateral to give loans. What’s required is to understand their business, capital need, payments cycle, who is their buyers, etc.,” Anil Bhardwaj, Secretary-General, Federation of Indian Micro and Small & Medium Enterprises had told Financial Express Online.

Also read: Budget 2020: GST reduction, R&D boost, more on auto MSMEs wish list for Nirmala Sitharaman

The manufacturing MSEs saw a higher contraction of 3.4 per cent since April this FY. From Rs 3.75 lakh crore as on March 29, 2019, the credit growth went down to Rs 3.62 lakh crore in November. For services MSEs, the amount grew by 0.4 per cent from Rs 6.91 lakh crore as on March 29, 2019, to Rs 6.94 lakh crore. MSME loans, however as per a report by ICICI Bank and Crisil last month, are expected to more than double in five years at 15 per cent CAGR between FY19 and FY24.

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