Banks deployed this much lesser credit to micro, small units in November 2021 from year-ago: RBI data

Credit and Finance for MSMEs: MSMEs’ share in total gross bank credit declined marginally to 12.01 per cent in November from 12.17 per cent in October.

Growth in credit to medium enterprises remained positive. (Image: Pixabay)

Credit and Finance for MSMEs: The year-on-year (YoY) growth in gross bank credit deployed to micro and small enterprises continued to be negative for the third straight month in November. The deployment in November 2021 stood at Rs 10.99 lakh crore, down minus 2.2 per cent from Rs 11.23 lakh crore in November 2020, showed latest data by the Reserve Bank of India on bank credit to major sectors. The YoY credit growth to MSEs was minus 0.5 per cent in October and minus 2.6 per cent in September vis-a-vis a positive 1.1 per cent growth in August and 0.2 per cent in July.

“The corporate sector has displayed resilience and bank credit growth is showing signs of a gradual recovery, led by the retail segment. Stress is, however, visible among micro, small and medium enterprises (MSME) and in the microfinance segment,” RBI said in its Financial Stability Report. According to the November 2021 round of the Systemic Risk Survey, majority of the respondents felt that the Indian economy will recover completely from the fallout of the pandemic in one-two years, however, MSME and other sectors such as tourism and hospitality, aviation, automobiles, real estate, retail trade and entertainment could, exhibit slower recovery over the next one year. 

In contrast, growth in credit to medium enterprises remained positive. Banks deployed Rs 2.42 lakh crore in November from Rs 1.80 lakh crore during the year-ago period – registering a growth of 34.2 per cent vis-a-vis 24.8 per cent jump from Rs 1.79 lakh crore in October 2020 to Rs 2.23 lakh crore in October 2021. In July, August, and September, the YoY growth rate was 70.9 per cent, 54.6 per cent, and 24.3 per cent respectively. 

However, MSMEs’ share in total gross bank credit also declined marginally to 12.01 per cent in November from 12.17 per cent in October, 12.04 per cent in September and 12.15 per cent in August 2021. As of November 19, 2021, gross bank credit deployed by scheduled commercial banks stood at Rs 111.62 lakh crore. Among other priority sectors, education loans also witnessed negative growth at minus 8.5 per cent while others including agriculture, housing, renewable energy, social infrastructure, and export credit recorded positive YoY growth in November. The overall economic recovery, nonetheless, remains shrouded due to Omicron. 

“The global recovery is clouded by the emergence of the Omicron variant of COVID-19. Inflationary pressures persist and monetary policy paths are diverging among major economies. On the domestic front, the recovery is regaining traction after the debilitating second wave of the pandemic,” RBI said in its report.

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