Credit and financing for MSMEs: Supplementary credit to MSMEs since the onset of the pandemic (March 2020) has seen an uptick with a significant jump of Rs 2.7 lakh crores, of which disbursements under the Emergency Credit Line Guarantee Scheme (ECLGS) have been around Rs 2.36 lakh crores, State Bank of India’s latest Ecowrap report said on Thursday.
“For a similar comparison, if we take into account the interest payments on the additional credit, the growth of pure credit disbursements to the MSME sector could be around Rs 3.2 lakh crore since the start of the pandemic” , notes the report.
While 74% of the credit or Rs 2.36 lakh crore is due to the credit guarantee scheme, the remaining 25% is due to other schemes including the revised MSME definition, he added. In terms of overall credit growth, the ECLGS contributed 15% of the expansion, according to the SBI report.
According to the latest data from the Reserve Bank of India (RBI), growth in bank credit to micro and small businesses in May stood at 27% from May 2021 with disbursements amounting to Rs 14.23 lakh crore , up from Rs 11.20 lakh crore in May last year. In April, the growth was 19.7% with disbursements reaching Rs 14.08 lakh crore from Rs 11.77 lakh crore in April 2021.
“The MSME sector, which has been hit hard by the pandemic, is showing signs of recovery (with) overall credit to the sector rebounded strongly during the fourth quarter of 2021-22, supported by significant growth in loans from private banks,” RBI noted. June 2022 Financial Stability Report.
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Credit growth to MSMEs was one aspect of overall credit growth across all sectors. According to provisional data from All Scheduled Commercial Banks (ASCB) for the fortnight ending June 17, credit growth crossed 13% to touch Rs 121 lakh crore. “Robust credit growth was reported across all sectors, including industrials, services and the personal segment, which grew 16.4% year-on-year, as per sector rollout in May 2022,” notes the SBI report.
However, the use of working capital by various sectors has been negatively affected in all sectors/companies specifically related to geopolitical tensions, he said. These sectors include petroleum, energy, engineering and also cement, perhaps due to the monsoon when construction activities take a back seat. In contrast, consumer-facing sectors such as leather and food processing did not experience a significant decline in their use of working capital.