Credit and financing for MSMEs: The growth rate of bank credit to retail and wholesale trade – included in the definition of MSMEs last year – more than doubled to 16.9% in August this year, from 7% during the period from the previous year, data from the Reserve Bank of India (RBI) showed. Rs 7.31 lakh crore of aggregate credit was deployed in retail and wholesale during the month compared to Rs 6.26 lakh crore deployed in August last year. The 52% or Rs 3.81 lakh crore of the total loan amount went to wholesalers (other than those involved in food supply) while the remaining 48% or Rs 3.50 lakh crore was rolled out to retailers.
Deployment of wholesale credit in August increased by 17.6% from Rs 3.24 lakh crore deployed in August last year. For retail, credit growth stood at 16% from the Rs 3.01 lakh crore loan deployed in August 2021, data from the RBI’s October bulletin released on Monday showed.
Importantly, the government reinstated retailers and wholesalers into the MSME category in July last year, about four years after they exited the scope of MSMEs. According to the notification to the official journal of June 27, 2017, the retail and wholesale activities were neither manufacturing units nor service units according to the definition of the MSMED law 2008. Therefore, they did not have was able to get the old Udyog Aadhaar memorandum (known as MSME registration). ).
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While the increase in the deployment of credit in two trade categories has occurred in the context of their inclusion in the definition of MSMEs, the financial difficulties of traders continue. According to credit rating company CareEdge’s report on first quarter FY23 insolvency cases, the number of cases admitted for the corporate insolvency resolution process (CIRP) under the Code of Insolvency and Bankruptcy (IBC), 2016 wholesale and retail business jumped 24.8% in the June quarter of the current fiscal year compared to the prior year period .
The share of the commercial sector with 567 cases (compared to 454 in June 2021) in the total of 5,636 insolvency cases during the first quarter of FY23 amounted to 10%. The manufacturing sector with 2,232 cases accounted for the highest share at 40% while real estate with 1,160 cases had a 21% share followed by an 11% share of the construction segment with 622 cases.
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