Credit and financing for MSMEs: Credit to Micro and Small Enterprises (MSEs) by All Scheduled Commercial Banks (ASCB) in FY 2021-22 stood at Rs 1.26 lakh crore, four times the credit growth of Rs 30,800 crore in FY21, according to data from the latest SBI Ecowrap report. “Timely policy interventions have helped ease the stress on individuals, MSMEs, businesses and lenders, and keeping access to finance open on easy terms,” the report said on Monday, as overall growth of credit increased by 1.8 times to Rs. 10.45 lakh crore in FY22 from Rs 5.77 lakh crore in FY21. The report was authored by the chief economic adviser of the SBI group, Soumya Kanti Ghosh.
“ECLGS has been an important factor that has improved the quality of SME loans to be maintained by banks and has also improved the overall profile of the MSME sector. Moreover, the government had revised the definition of MSMEs in 2020, which brought many large companies into the category of MSMEs, while Covid was also taken care of to a large extent last year. Its positive impact is now visible. Also, with digitalization making the banking process easier for loans, more banks are now keen to lend to MSMEs,” Sanjay Agarwal, Senior Director, CARE Ratings, told Financial Express Online.
In addition, incremental banking sector lending to MSMEs in FY21 was lower than lending under ECLGS, meaning there was a decline in non-ECLGS (normal) lending in FY21. due to extreme caution stemming from Covid, Agarwal said. This year, with the economic recovery, there is positive normal loan growth and as a result, MSE loan growth looks exponentially higher, he added. As of March 11, 2022, about 95.21% of the 117.87 lakh ECLGS beneficiaries were MSMEs, State Minister for Finance Bhagwat Karad had said in a written response to a question to Rajya Sabha in March.
Importantly, the year-on-year (YoY) growth in bank credit to MSEs for the month of March 2022 also recorded double-digit growth, according to data from the Reserve Bank of India (RBI). ). Banks had deployed Rs 13.12 lakh crore in March 2022, up 10.6% from Rs 11.86 lakh crore in March 2021. Annual credit disbursement growth had turned positive in December after registering a contraction in September, October and November of last year.
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Even though MSE credit growth jumped significantly, concerns about asset quality continued to prevail. According to a recent study by Crisil-Assocham, MSMEs Back to the Grind, the NPA level of MSMEs had jumped sharply to 18.5% in September 2021, from 16.8% in March 2021. The drop was largely in the Note size under Rs 25 crore at major banks. Overall, MSME annual NPAs increased from 8.6% in FY19 to 12.6% and 12.5% in FY20 and FY21 respectively and are expected to also remain at about the same level for exercise 22.
“The whole problem for MSMEs is their timely payments. If dues are paid on time, overall 90% of the problem is solved. This time, the government will have huge tax loans, so I hope they will be able to meet the payments on time for the MSME sector. Overall, I believe that with the economy returning to normality, the growth of ECLGS loans, the inclusion of wholesalers and retailers in the MSME sector and other factors have led to an increase in small business loans,” VG Kannan, former MD, SBI and former Managing Director of Association of Indian Banks told Financial Express Online.
According to the Union budget document, the gross borrowing in the market through dated securities for FY23 would be Rs 14.95 lakh crore. However, considering the transfer operations conducted on January 28, 2022, the loan is expected to amount to Rs 14.31 lakh crore, the Ministry of Finance had said in a statement in March. In comparison, gross borrowing for FY22 was Rs 12.05 lakh crore.
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