MSME credit growth in August 2021: Bank credit to micro and small businesses only increased 1.1% from last year, RBI data shows

Credit and financing for MSMEs: The year-over-year (year-over-year) growth of gross bank credit to the micro and small enterprise (MSE) sector in August improved further from the year-over-year growth in July. Banks rolled out Rs 11.10 lakh crore in August 2021, up just 1.1% from Rs 10.98 lakh crore in August 2020, the latest data from the Reserve Bank of India (RBI) showed, compared to 0.2% growth to Rs 10.99 lakh crore in July 2021 from Rs 10.96 lakh crore over the period of last year. Growth, nonetheless, indicated the gradual opening of businesses in several sectors following the easing of Covid-related restrictions after the second wave of the pandemic in March of this year.

The positive pick-up in credit growth follows three months of negative year-on-year credit growth, falling from minus 2.2% in April of this year to minus 3.6% in May and minus 3.5% in June , according to data from previous RBI newsletters.

“Although I am a debt free business and do not need a bank loan, many small businesses face challenges in obtaining bank credit. Although the intention is there among the banks, as requested by the government, the situation on the ground is quite different. How would MSMEs have good books when they were hit by the pandemic and suffered losses. Banks only focus on businesses with a good track record and not on those that genuinely need their support. Although credit is given, but not really to businesses that need it more than anyone else, ”MV Ramesh Babu, CEO of Paramount Platers, told Financial Express Online.

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Paramount Platers is involved in the chrome plating. Babu is also the president of the Coimbatore District Small Scale Industries Association and one of 20 members called the All India Council of Association of MPMEs (AICA) formed earlier this year to fight the impact of Covid on MSMEs.

On the other hand, the year-on-year growth of bank credit to medium-sized enterprises stood at 54.6% in August, down from the year-on-year growth of July at 70.9% and 63.2%. in June. Banks deployed Rs 2.15 lakh crore in August compared to Rs 1.39 lakh crore in August 2020, RBI August data on sector bank lending showed. The amount, however, was over Rs 2.09 lakh crore deployed in July 2021 and Rs 1.22 lakh crore in July of last year. July’s growth was the highest in the current fiscal year after growing 70.8% in April of this year.

In FY21, loans to MSMEs, which represent a significant share of total commercial lending volume, also saw their value increase by almost 52%. From 16.2% in FY2017, the value of MSME loans in commercial loans grew to 24.6% in FY21, credit bureau CRIF High Mark said in its report. How India Lnds 2021 last month. In addition, there was a 33 percent growth in value share and 47 percent in volume share of microenterprise loans from FY17 to FY21. Private banks had dominated. the outstanding MSME loan portfolio with a share of 41.7%, while public sector banks dominated active lending with a share of 39.7% in March 2021.

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Last month, the government announced that as of September 24, 2021, banks had sanctioned loans worth over Rs 2.86 crore under the Emergency Line of Credit Guarantee Program (ECLGS ), and this relief to over 1.15 crore from MSMEs and companies under the ECLGS since the inception of the scheme. ECLGS is now valid until March 31, 2022, or until guarantees for the overall cap of Rs 4.5 lakh crore are issued, whichever comes first.

It is important to note that the share of MPE credit in the country’s overall gross bank credit of 108.97 lakh crore in August also improved to reach 10.19% in August, from 10.07% in July and 9 , 55% in June, after having experienced a decline for five months. However, aggregate bank credit in August had declined by Rs 109.10 lakh crore in July while it stood at Rs 108.41 lakh crore in June. The share of MSEs had increased from 12.11% in December of last year to 12.09% in January 2021, 11.8% in February, 11.3% in March, 9.7% in April and 9, 48% in May.