Credit and Finance for MSMEs: The incremental credit to MSMEs since the beginning of the pandemic (March 2020) has been on an upswing witnessing a significant jump of Rs 2.7 lakh crores, of which disbursements under the Emergency Credit Line Guarantee Scheme (ECLGS) have been around Rs 2.36 lakh crores, said State Bank of India’s latest Ecowrap report on Thursday.
“For a like-to-like comparison, if we factor in the interest payments to incremental credit, the growth in pure credit disbursements to MSME sector could be around Rs 3.2 lakh crores since the beginning of the pandemic,” the report noted.
While 74 per cent of the credit or Rs 2.36 lakh crore is because of the credit guarantee scheme, the remaining 25 per cent is because of other schemes including the revised MSME definition, it added. In terms of overall credit growth, ECLGS contributed 15 per cent of the expansion., SBI report said.
According to the latest data by the Reserve Bank of India (RBI), growth in bank credit to micro and small enterprises in May stood at 27 per cent from May 2021 with disbursements amounting to Rs 14.23 lakh crore, up from Rs 11.20 lakh crore in May last year. In April, the growth was 19.7 per cent with disbursements hitting Rs 14.08 lakh crore vis-a-vis Rs 11.77 lakh crore in April 2021.
“MSME sector, which was hit hard by the pandemic, is showing signs of revival (with) aggregate credit to the sector witnessed a strong revival during Q4 2021- 22 supported by significant growth in lending by private banks,” RBI had noted it its June 2022 Financial Stability Report.
Growth in MSME credit was one of the aspects of the overall credit growth across sectors. As per the provisional data of all scheduled commercial banks (ASCBs) for the fortnight ending 17th June, credit growth crossed 13 per cent to touch Rs 121 lakh crore. “Robust credit growth was reported across sectors including, industry, services and personal segment, which grew by 16.4 per cent YoY, as per the sectoral deployment as of May 2022,” SBI report noted.
However, utilisation of working capital by various sectors has been impacted adversely across sectors/companies specifically linked to the geopolitical tensions, it said. These sectors include petroleum, power, engineering and also cement possibly because of monsoon when construction activities take a backseat. In contrast, consumer-facing sectors such as leather, and food processing did not see a material decline in their working capital utilisation.
