RBI: Bank credit to MSEs up 6.8% in October even as deployment to manufacturing units climb out of red

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December 24, 2020 3:00 PM

Credit and Finance for MSMEs: While the overall year-on-year credit growth to MSEs showed continued growth, credit deployment to manufacturing MSEs was finally out of red in the current FY.

MSME, dues clearance, ECLGS, credit guarantee schemeGeM added over 1 lakh sellers in November 2020 itself.

Credit and Finance for MSMEs: The deployment of gross bank credit to micro and small enterprises (MSEs) remained steady in October as well. From Rs 10.53 lakh crore as on October 25, 2019, the deployment was up 6.8 per cent to Rs 11.25 lakh crore as on October 23, 2020, according to the Reserve Bank of India (RBI) data. The credit growth in September was 6.7 per cent to Rs 11.27 lakh crore while August deployment increased 5.4 per cent to Rs 11.04 lakh crore from the year-ago period. However, the October 2020 credit growth continued to contract by minus 2.1 per cent in the financial year 2020-21 so far, up from minus 1.9 per cent in September. As of March 27, 2020, bank credit to MSEs stood at Rs 11.49 lakh crore.

Importantly, while the overall year-on-year credit growth to MSEs showed continued growth, credit deployment to manufacturing MSEs was finally out of red in the current FY with a growth of 0.7 per cent in October to Rs 3.61 lakh crore from Rs 3.59 lakh crore in October FY20. The segment had remained contracted since March when credit growth was 1.7 per cent. The highest contraction of minus 3.7 per cent was recorded in June while for April, May, July, August, and September, the growth shrunk by minus 2.2 per cent, minus 3.4 per cent, minus 1.9 per cent, minus 1.2 per cent, and minus 0.1 per cent respectively. However, credit growth remained contracted in the financial year so far. The decline in FY21 so far was minus 5.3 per cent from Rs 3.81 lakh crore deployed in March.

Also read: Digital lending fraud: RBI cautions small businesses, individuals against unauthorised loan apps

Deployment to services MSE continued to be in green in October FY21. The gross bank credit growth was up 10 per cent from Rs 6.94 lakh crore in October last FY to Rs 7.63 lakh crore. Similarly, for September, the deployment grew 10.2 per cent to Rs 7.66 lakh crore and for August, it was up 8.8 per cent to Rs 7.49 lakh crore. Nonetheless, the growth in FY21 so far till October remained negative to 0.5 per cent from Rs 7.67 lakh crore in March 2020. The contraction in the FY till September stood at minus 0.2 per cent to Rs 7.66 lakh crore.

Meanwhile, the government had enabled sanctioning of over 80 lakh loans involving Rs 2.05 lakh crore out of which loans involving more than Rs 1.58 lakh crore has been disbursed as of December 4, 2020, under the Emergency Credit Line Guarantee Scheme. The scheme was extended from October 31, 2020, to November and further till March 2021 as it targeted to enable disbursement of Rs 3 lakh crore scheme corpus announced in May as part of the Atmanirbhar package to MSMEs, individuals, Mudra enterprises, and other businesses.

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