Growth in bank lending to small businesses remain flat in FY20 so far; here’s what RBI data shows

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Published: February 11, 2020 7:12:50 PM

Credit and Finance for MSMEs: MSEs in manufacturing witnessed a higher contraction of 2.7 per cent for the April-December period in the current FY.

The scenario is not quite positive even in terms of the year-over-year (YoY) credit growth.

Credit and Finance for MSMEs: Credit growth to micro and small enterprises (MSE) by banks remained contracted for December 2019 also in the current financial year, according to the recent data from the Reserve Bank of India. Since April when the gross bank credit growth to MSEs was in red at minus 0.1 per cent, the trend has continued till December during which the contraction was 0.5 per cent. July and August recorded the highest contraction in credit to MSEs at minus 1.8 per cent. The December bank credit stood at Rs 10.61 lakh crore — 5.7 per cent up from Rs 10.04 lakh crore in the year-ago period. In November FY20, the credit given was Rs 10.57 lakh crore, as per the RBI’s February 2020 bulletin. The credit outstanding as on March 29, 2019, was Rs 10.67 lakh crore.

The scenario is not quite positive even in terms of the year-over-year (YoY) credit growth in the current FY so far as the percentage of amount has gone down gradually. On YoY basis, from 11.9 per cent credit growth between April FY19 and April FY20, the share has plummeted to 11 per cent for June, July’s stood at 7.8 per cent while October saw 5.8 per cent credit growth. This went up to 6.2 per cent for November but only to slip back to 5.7 per cent in December, as per the RBI’s February bulletin.

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MSEs in manufacturing witnessed a higher contraction of 2.7 per cent for the April-December period in the current FY. From Rs 3.75 lakh crore as on March 29, 2019, the credit growth declined to Rs 3.65 lakh crore in November. For services MSEs, the amount grew by 0.7 per cent from Rs 6.91 lakh crore as on March 29, 2019, to Rs 6.96 lakh crore. However, according to a report by the ICICI Bank and Crisil in December, MSME loans are likely to more than double in five years at 15 per cent CAGR between FY19 and FY24.

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