Credit and financing for MSMEs: Total bank credit deployed across the MSME sector in January was 13.11% of India’s total gross bank credit of Rs 115.82 lakh crore.
Credit and financing for MSMEs: Year-on-year growth in the deployment of gross bank credit to micro and small enterprises (MSEs) in January 2022 remained positive at 4.8%, although down from 6.8% during from the prior year period, the latest data on bank lending sector deployment by the Reserve Bank of India (RBI) showed. Banks rolled out Rs 12.44 lakh crore to MSEs in January 2022, up from Rs 11.87 lakh crore in January 2021. The growth had come amid the third wave of the pandemic, indicating negligible impact on businesses.
Growth in bank credit to MSEs had turned positive in December 2021 after being in the red for three consecutive months. Year-on-year growth in December stood at 9.1% at Rs 12.53 lakh crore against Rs 11.48 lakh crore deployed in the period a year ago, against minus 2.2%, minus 0.5% and minus 2.6% year-on-year growth in September and October. , and November respectively last year.
Mid-sized companies also reported credit growth of 42.1% year-on-year in January, compared to 50.4% growth in December. Banks had deployed Rs 2.75 lakh crore to medium-sized enterprises in January compared to Rs 1.93 lakh crore in January 2021 and Rs 2.76 lakh crore in December 2021. The highest annual growth rate in the financial year in progress was recorded at 70.9% in July.
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Total bank credit deployed across the MSME sector in January was Rs 15,19,495 crore – 13.11% of India’s total gross bank credit of Rs 115.82 lakh crore in January, down from 13% in December and 12.01% in November.
Last month, Finance Minister Nirmala Sitharaman urged banks to be friendlier when it comes to supporting entrepreneurs such as small businesses and startups. “Our Prime Minister said I am the security behind you, please borrow. This is where in Mudra and PM-SVANidhi regimes he told the banks that I am the security behind them (entrepreneurs). The performance in terms of management of (these) loans is very good,” Nirmala Sitharaman said during her post-budget exchange with industry representatives in Mumbai.
The MSME credit gap remained wide in the country even though the government had launched several programs such as ECLGS, Standup India, Mudra Loans, PM SVANidhi and many others to help MSMEs get credit banking. According to a November 2018 report by the International Finance Corporation, the addressable credit gap in the MSME sector was estimated at around Rs 25.8 lakh crore. The UK Sinha Committee in June 2019 had also noted that the overall credit gap in the MSME sector was Rs 20-25 lakh crore.
However, no official study has been undertaken by the central government to estimate the current credit gap in the MSME sector, MSME Minister Narayan Rane said in a written response to a question to Rajya Sabha last month. The credit gap was the difference between the total supply of credit from formal channels in the country and the addressable demand.