Bank credit to micro and small enterprises continues to increase; jumped 27% in May from a year ago: RBI data

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Credit and financing for MSMEs: Year-on-year (YoY) growth in gross bank credit deployed to micro and small enterprises (MSEs) jumped significantly to 27% in May from 19.7% in April, according to recent data on the sectoral deployment of bank credit by the Reserve Bank of India (RBI) showed. Banks disbursed Rs 14.23 lakh crore in May 2022 compared to Rs 11.20 lakh crore in May 2021. In April, Rs 14.08 lakh crore was deployed in MSEs from Rs 11.77 lakh crore in April 2021. The annual growth of bank credit to MSEs has been increasing since December 2021, indicating the negligible impact of the third Covid wave after declining for three consecutive months from September to November.

“The MSME sector, which has been hit hard by the pandemic, is showing signs of recovery (with) overall credit to the sector rebounded strongly during the fourth quarter of 2021-22, supported by significant loan growth from private banks,” RBI said in its latest Financial Stability Report launched earlier this week.

“The surge in domestic demand and the recovery of ancillary industries and service units have increased the financing needs of this sector, which provides jobs for a large part of the population,” the report notes.

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Year-on-year credit growth to medium-sized enterprises stood at 64.8% in May 2022 at Rs 3.57 lakh crore from Rs 2.16 lakh crore in the period a year ago. By comparison, Rs 3.54 lakh crore was rolled out to mid-sized businesses in April, up 65% from Rs 2.15 lakh crore in April 2021.

Overall credit deployed in the MSME sector in May stood at Rs 17.81 lakh crore compared to Rs 17.63 lakh crore deployed in April and Rs 16.17 lakh crore in March. Meanwhile, MSME share in India’s gross bank credit of Rs 120.27 lakh crore also increased slightly to 14.80% in May from 14.75% in April’s gross bank credit of Rs 119.54 lakh crore.

Credit growth to other sectors, including agriculture, housing, renewable energy, etc., under lending to priority sectors, was also positive in May, while lending to education, social infrastructure and export credit recorded negative growth.

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