MSME lending: Growth in bank credit bounces back after months of contraction in FY20

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Published: March 11, 2020 7:44:09 PM

Credit and Finance for MSMEs: The manufacturing MSEs secured Rs 3.73 lakh crore in credit -- minus 0.7 growth in the FY20 so far while on YoY basis it grew by 0.5 per cent.

The scenario in terms of the year-over-year (YoY) credit growth has also improved.

Credit and Finance for MSMEs: Gross bank credit growth to micro and small enterprises (MSE) has finally recorded positive growth for the month of January after 10 months of contraction throughout FY20, according to the latest data from the Reserve Bank of India. Since April month, when the gross bank credit growth to MSEs was in red at minus 0.1 per cent, it had remained contracted till December. The credit given to MSEs as on January 31, 2020, was worth 11 lakh crore — 3.1 per cent growth in the FY20 so far. July and August saw the highest contraction in credit to MSEs at minus 1.8 per cent, as per the RBI’s March 2020 bulletin.

The scenario in terms of the year-over-year (YoY) credit growth has also improved as the percentage of the amount had declined gradually till December. From 11.9 per cent credit growth between April FY19 and April FY20 and 11 per cent for June, the share went down to 7.8 per cent for July while October saw 5.8 per cent credit growth. While it increased to 6.2 per cent for November but again plummeted to 5.7 per cent in December, as per the RBI’s February bulletin. However, for January, the share bounced back to 8.1 per cent as the January FY19’s credit to MSEs was Rs 10.18 lakh crore.

Also read:Startup India: Under Modi’s pet scheme, number of funded startups increased this much in eight months

The manufacturing MSEs secured Rs 3.73 lakh crore in credit — minus 0.7 growth in the FY20 so far while on YoY basis it grew by 0.5 per cent. For services MSEs, the credit stood at Rs 7.27 lakh crore — up 5.2 per cent in the financial year so far while the growth from the year-ago period was 12.4 per cent. In order to ease access to credit for MSMEs, the government had revised the guidelines for ‘Interest Subvention Scheme for Incremental Credit to MSMEs 2018’ in December last year. This exempted GST-registered MSMEs from requiring Udyog Aadhar Number (UAN) to avail the scheme. Small businesses were earlier required to have UAN and GSTN for the same.

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