Credit and Finance for MSMEs: Loans to micro, small, and medium enterprises, which represent a major share in the overall commercial loans by volume, have witnessed a nearly 52 per cent increase in value as well. From 16.2 per cent in FY17, the MSME loan value in commercial loans jumped to 24.6 per cent in FY21, according to a new report on the overall lending data. MSME loan (credit exposure up to Rs 50 crore) volume had a share of 85 per cent of commercial loans in March 2021, credit bureau CRIF High Mark said in its report How India Lends 2021. “Overall commercial loans witnessed 17.6 per cent year-on-year growth as of March 2021 in terms of active loans and 2.3 per cent by portfolio outstanding.” Importantly, the share of bank credit to micro and small enterprises in India’s gross bank credit stood at 10.07 per cent in July, as per the data from the Reserve Bank of India. The gross bank credit was Rs 109.10 lakh crore in July.
The report also noted a 33 per cent growth in share by value and 47 per cent growth in share by volume of loans to micro-enterprises among MSMEs from FY17 to FY21. With respect to market share, public and private banks dominated the overall commercial loans and MSME Loans market (by value and volume). As per the report, private banks led the portfolio outstanding for MSME loans with a share of 41.7 per cent, while public sector banks dominated active loans with a share of 39.7 per cent as of March 2021. Also, there was a growth of 37 per cent in originations by value for MSME loans from FY17 to FY21.
With ease in Covid-related restrictions, bank lending to the MSEs in July posted a 0.2 per cent growth at Rs 10.99 lakh crore from Rs 10.96 lakh crore in July last year, as per RBI data. The credit growth had slipped into negative in April this year to minus 2.2 per cent after recording the lowest growth in credit deployment at 2.5 per cent in March this year amid the second wave of the pandemic. The growth had stood at minus 3.6 per cent in May and minus 3.5 per cent in June.
As per the latest government data on the flagship post-Covid scheme for MSMEs – ECLGS, 60.6 per cent of the Rs 4.5 lakh crore loan limit was sanctioned as of July 2, 2021. Rs 2.73 lakh crore in loans was sanctioned, of which Rs 2.14 lakh crore was disbursed by partner banks and NBFCs. Moreover, guarantees were issued for loans granted to around 1.09 crore MSMEs, MSME Minister Narayan Tatu Rane had informed the Rajya Sabha in July.