Banks deployed only 1.1% more credit to micro, small businesses in August vis-a-vis year-ago

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Updated: October 07, 2021 11:36 AM

MSME Credit Growth August 2021: The share of MSEs in the country’s overall gross bank credit of Rs 108.97 lakh crore in August improved to 10.19 per cent from 10.07 per cent in July and 9.55 per cent in June after witnessing a decline for five months, as per the data from the Reserve Bank of India (RBI).

"Credit Guarantee for MFIs fully utilised within 75 days. Rs 7500 cr sanctioned to #MFIs under #CGSMFI for onlending to small borrowers. Big boost to consumption and livelihoods," the ministry said in a tweet.The YoY bank credit growth to medium enterprises stood at 54.6 per cent in August, down from July YoY growth at 70.9 per cent and 63.2 per cent in June.

Credit and Finance for MSMEs: Year-on-year (YoY) growth in gross bank credit to the micro and small enterprise (MSE) sector in August improved further from YoY growth in July. Banks deployed Rs 11.10 lakh crore in August 2021, up by 1.1 per cent only from Rs 10.98 lakh crore in August 2020, latest data from the Reserve Bank of India (RBI) showed, in comparison to 0.2 per cent growth to Rs 10.99 lakh crore in July 2021 from Rs 10.96 lakh crore during the year-ago period. The growth, nonetheless, indicated the gradual opening up of businesses across multiple sectors following relaxations in Covid-related restrictions post the second wave of the pandemic in March this year.

The positive recovery in credit growth followed three months of negative YoY credit growth from minus 2.2 per cent in April this year to minus 3.6 per cent in May and minus 3.5 per cent in June, data from RBI’s previous bulletins showed.

“While I’m a zero-debt company and don’t need bank loan but a lot of small businesses are facing challenges in securing bank credit. Though the intent is there among banks as urged by the government but the ground situation is quite different. How would MSMEs have good books when they were impacted by the pandemic and suffered losses. Banks are focusing only on businesses that have good records and not on those who actually need their support. While credit is being given but not really to businesses who need it more than anyone else,” MV Ramesh Babu, CEO, Paramount Platers told Financial Express Online.

Also read: Delayed payment applications filed by MSMEs near a whopping 1-lakh mark: Govt data

Paramount Platers is involved in chrome plating. Babu is also the President of The Coimbatore District Small Scale Industries Association and one of the 20-member body called the All India Council of Association of MSMEs (AICA) formed earlier this year to address Covid-related impact on MSMEs.

On the other hand, the YoY bank credit growth to medium enterprises stood at 54.6 per cent in August, down from July YoY growth at 70.9 per cent and 63.2 per cent in June. Banks deployed Rs 2.15 lakh crore in August vis-a-vis Rs 1.39 lakh crore in August 2020, RBI’s August data on sectoral bank credit showed. The amount, however, was higher than Rs 2.09 lakh crore deployed in July 2021 and Rs 1.22 lakh crore in July last year. The July growth was highest in the current financial year after 70.8 per cent growth in April this year.

In FY21, MSME loans, which have a major share in the overall commercial loans by volume, saw close to 52 per cent increase in value as well. From 16.2 per cent in FY17, the MSME loan value in commercial loans jumped to 24.6 per cent in FY21, credit bureau CRIF High Mark said in its report How India Lends 2021 last month. Moreover, there was a 33 per cent growth in share by value and 47 per cent growth in share by volume of loans to micro-enterprises from FY17 to FY21. Private banks had led the portfolio outstanding for MSME loans with a share of 41.7 per cent, while public sector banks dominated active loans with a share of 39.7 per cent as of March 2021. 

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The government last month had announced that as of September 24, 2021, banks had sanctioned loans worth more than Rs 2.86 lakh crore under the Emergency Credit Line Guarantee Scheme (ECLGS) scheme, and that relief to over 1.15 crore MSMEs and businesses under ECLGS since the scheme’s launch. ECLGS is now valid till March 31, 2022, or till guarantees for the overall ceiling of Rs 4.5 lakh crore are issued, whichever is earlier.

Importantly, the share of MSE credit in the country’s overall gross bank credit of Rs 108.97 lakh crore in August also improved to 10.19 per cent in August from 10.07 per cent in July and 9.55 per cent in June after witnessing a decline for five months. However, the overall bank credit in August had declined from Rs 109.10 lakh crore in July while it stood at Rs 108.41 lakh crore in June. MSEs’ share had slipped from 12.11 per cent in December last year to 12.09 per cent in January 2021, 11.8 per cent in February, 11.3 per cent in March, 9.7 per cent in April, and 9.48 per cent in May.

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