MSME Credit and Finance: Year-on-year growth in bank credit to MSMEs remained negative at minus 2.2%, minus 0.5% and minus 2.6% in September, October and November respectively last year.
Credit and financing for MSMEs: Year-on-year (YoY) growth in bank credit to micro and small enterprises (MSEs) turned positive in December 2021 after negative growth for three consecutive months, according to the latest data from the Reserve Bank of India ( RBI). Credit deployed to MSEs in December jumped an impressive 9.1% to Rs 12.53 lakh crore from Rs 11.48 lakh crore deployed in the prior year period, RBI data showed. on the sectoral deployment of bank credit in December.
Year-on-year growth in bank credit to MSEs remained negative at minus 2.2%, minus 0.5% and minus 2.6% in September, October and November respectively last year. Importantly, the month-on-month growth reported in December was a staggering 14% from Rs 10.99 lakh crore rolled out in November 2021 even as the Omicron variant hit India in December with the first case reported on December 2 in Karnataka.
“Omicron’s impact on credit rollout will not be as severe as waves one and two since the restrictions were negligible in December. Whatever little impact one might see in December and January, it’s likely to be reflected in the next two months. However, I don’t think the latest wave would have a huge impact on disbursements. Companies were largely out of the woods towards the end of the year. last year and should gain momentum even if there is, heaven forbid, another wave,” a former banker told Financial Express Online on condition of anonymity.
Growth in loans extended to medium-sized businesses also rebounded. After a 34.2% year-on-year jump in November and a 24.8% growth in October, banks rolled out 50.4% more credit in December to Rs 2.76 lakh crore from Rs 1 .83 lakh crore deployed a year ago even as the growth rates for July and August were higher at 70.9% and 54.6% respectively.
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Total bank credit deployed to the MSME sector in December 2021 was Rs 15.30 lakh crore, up 14% from Rs 13.41 lakh crore in November 2021. As a result, the share of bank credit to MSMEs in India’s total gross bank credit of Rs 116.83 lakh crore in December also increased to 13% from 12.01% in November and 12.17% in October.
To support the deployment of credit among MSMEs, the government has extended the popular Emergency Credit Line Guarantee Scheme (ECLGS) by one year until March 2023 and raised the limit of the scheme by an additional Rs 50,000 crore for a total of Rs 5 lakh crore. As of November 12, 2021, loans of Rs 2.28 lakh crore have been disbursed to MSMEs and other businesses out of sanctioned loans of Rs 2.82 lakh crore, according to data from the National Credit Guarantee Trustee Company (NCGTC) cited by the Reserve Bank of India (RBI) in its Financial Stability Report.