Credit and financing for MSMEs: After two months of positive growth in the annual deployment of gross bank credit to micro and small enterprises (MSEs), credit growth turned negative again in September 2021 despite the post-Covid economic recovery and the easing linked to the pandemic. restrictions. Banks have deployed Rs 11 lakh crore, down by minus 2.6% from Rs 11.13 crore in September 2020, the latest data from the Reserve Bank of India (RBI) on the deployment of the gross bank credit in major sectors. The contraction follows 0.2% year-on-year growth in July and 1.1% in August 2021 after the previous three months of negative year-on-year growth of minus 2.2% in April to minus 3.6 % in May and minus 3.5% in June, data from previous RBI newsletters showed.
For medium-sized enterprises, while year-on-year bank credit growth remained positive, the growth rate continued to decline to 24.3% in September 2021, from 54.6% in August and 70.9% in July. . Banks deployed Rs 2.19 lakh crore in September compared to Rs 2.07 lakh crore during the period last year. In August, Rs 2.15 lakh crore was deployed against Rs 1.39 lakh crore in August 2020. However, the 71% growth in July was the highest in the current fiscal year after growth of 70.8 % in April of this year.
It is important to note that the total gross bank lending of Rs 13.20 lakh crore deployed in the MSME sector in September 2021 represented 12.04% of India’s overall gross bank lending of Rs 109.56 lakh crore. This fell slightly from 12.15% in August 2021. Overall bank lending in September, however, was up from 108.97 lakh crore in August. By comparison, total bank credit in July was Rs 109.10 lakh crore and Rs 108.41 lakh crore in June.
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“While large companies can easily get loans, the challenge is faced by MSMEs where the credit size is over Rs 5-7 crore as they need medium term capital while many banks ask for loans. guarantees. MSMEs do not have additional collateral with them for banks to disburse loans, although the government has urged and encouraged banks to provide loans to MSMEs without collateral. Then there are also opportunities for NPAs in MSME sector banks to tackle in the future, ”said Vinod Karwa, Owner, Victor Agencies and Co-Chair, MSME Committee, Chamber of Commerce and Industry PHD at Financial Express Online.
In September, the government extended its flagship post-Covid credit guarantee program for MSMEs, ECLGS, until March 31, 2022. As of September 24, 2021, sanctioned loans had exceeded Rs 2.86 lakh crore under the ECLGS program, and on the total of guarantees issued. , about 95 percent concerned loans to MSMEs, the finance ministry said in its statement. The last disbursement date under the program has also been extended to June 30, 2022. In addition, to relieve stress from Covid, the RBI in June of this year expanded the scope of the restructuring facility for loans. existing MSMEs from Rs 25 crore earlier to Rs. 50 crore without downgrading in asset classification until September 30, 2021.