Credit and Finance for MSMEs: The MSME credit growth between during 2014-19 period was 10 per cent CAGR outpacing corporate credit growth at 8 per cent CAGR.
Credit and Finance for MSMEs: Year-on-year credit growth to the MSME sector by banks and NBFCSs is likely to moderate to 7-8 per cent in the current financial year. The credit will grow to Rs 19 lakh crore from Rs 17 lakh crore in FY19 and Rs 16 lakh crore in FY18, according to a research report by Crisil and Assocham. The percentage annual growth in FY18 was 12 per cent and 9 per cent in FY19. While the MSME lending saw double-digit growth before FY15 however, the sector faced headwinds due to demonetisation and GST even as bankers turned cautious amid an increase in gross non-performing assets. However, there was some recovery visible in FY18 but again the lending took a hit due to the NBFC liquidity crisis from the second half of FY19.
Along with the impact of the NBFC liquidity crisis, the overall economic slowdown is among the reasons for slow credit growth. For FY21, “we expect a marginal uptick to 8-9 per cent following some sentiment improvement,” the report said. The MSME credit growth between during 2014-19 period was 10 per cent CAGR outpacing corporate credit growth at 8 per cent CAGR. This had increased the share of MSME credit in corporate credit from 25 per cent in FY15 to 28 per cent in FY19.
Importantly, the share of NBCFs in MSME lending has increased incrementally in FY15, FY17, and FY19 from 14 per cent and 18 per cent to 21 per cent respectively due to aggressive lending. While this cut banks’ share from 86 per cent in FY15 to 82 per cent in FY17 and 79 per cent in FY20, the share of NBFC lending is expected to slow down. India’s MSME sector, which comprises of around 60 million units, has secured majority bank lending — 55 per cent in six states including Maharashtra, Tamil Nadu, Gujarat, Delhi, Uttar Pradesh, and Karnataka, as per the data from the Reserve Bank of India. Moreover, in terms of sectors, real estate, independent power producers and energy traders, transportation infrastructure with 15 per cent, 12 per cent, 7 per cent have largest share of MSME credit, the report said.