Credit growth to micro, small enterprises improved to 19% in July from 1.4% year ago: RBI data

Source: Financial Express, 01 September 2022

Credit and Finance for MSMEs: The year-on-year growth in credit deployed by scheduled commercial banks to micro and small enterprises (MSEs) improved to 19.2 per cent in July 2022 from 1.4 per cent in July 2021, according to the latest data by the Reserve Bank of India (RBI) on sectoral deployment of bank credit. The total bank credit to MSEs in July this year stood at Rs 14.41 lakh crore vis-a-vis Rs 12.09 lakh crore a year ago. Credit growth to MSEs has remained positive since December last year, indicating a negligible impact of the third wave of the pandemic and gradual economic recovery. During June, the YoY growth stood at 23.7 per cent while in May, 27 per cent growth was recorded.

However, credit growth to medium enterprises in July moderated to 49.1 per cent from 67.8 per cent in July 2021. Medium enterprises raised Rs 3.67 lakh crore during the month in comparison to Rs 3.51 lakh crore raised a year ago, the RBI data showed. Meanwhile, credit growth to medium units during June stood at 60 per cent with Rs 3.63 lakh crore deployed and 64.8 per cent in May with Rs 3.57 lakh crore deployed.

The aggregate credit deployed to the MSME sector, combining credit to MSEs and medium enterprises, in July was Rs 18.08 lakh crore, up 24 per cent from Rs 14.56 lakh crore in July last year. During April, May, and June in the current financial year, credit deployed to MSMEs stood at Rs 17.63 lakh crore, Rs 17.81 lakh crore, and Rs 17.93 lakh crore respectively.

“For a like-to-like comparison, if we factor in the interest payments to incremental credit, the growth in pure credit disbursements to MSME sector could be around Rs 3.2 lakh crore since the beginning of the pandemic,” the report said. While 74 per cent of the credit or Rs 2.36 lakh crore is because of the credit guarantee scheme, the remaining 25 per cent is because of other schemes including the revised MSME definition, it added. In terms of overall credit growth, ECLGS contributed 15 per cent of the expansion.

However, the asset quality in the MSME sector is still a concern. The MSME non-performing assets (NPAs) had increased by 12.59 per cent in Q4 FY22 to Rs 2.95 lakh crore from Rs 2.62 lakh crore during Q4 FY21, a report by SIDBI and credit bureau TransUnion CIBIL showed last month. The overall MSME NPA rate as on March’22 stood at 12.8 per cent in comparison to 12.5 per cent for March’21. Also, a survey of 25 banks, which constitutes about 76 per cent of the total banking asset size, by FICCI and Indian Banks’ Association (IBA) in August noted that 65 per cent of respondent banks expect MSME NPAs to increase in the second half of the current calendar year.

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