Banks lend 5% more to MSMEs in July from year-ago period even as credit growth contracts in FY21 so far

Credit and Finance for MSMEs: Gross bank credit to micro and small enterprises in July was up 5.1 per cent to a little over 11 lakh crore from Rs 10.47 lakh crore in July 2019.

Credit and Finance for MSMEs: Gross bank credit to micro and small enterprises (MSE) in July was up 5.1 per cent to a little over 11 lakh crore from Rs 10.47 lakh crore in July 2019, according to the data from Reserve Bank of India. However, the growth had contracted in terms of the financial year so far. The credit growth stood at minus 4.2 per cent in July from Rs 11.49 lakh crore deployed as on March 27, 2020, according to the RBI’s September bulletin. However, the deployment in June 2020 was 6.5 per cent up to Rs 11.32 lakh crore from Rs 10.62 lakh crore in the year-ago period while for May 2020 the credit deployment was at Rs 10.77 lakh crore — 1.5 per cent more from Rs 10.62 lakh crore in May 2019. The April 2020 growth was 3.3 per cent to Rs 11 lakh crore from April 2019.

While the overall credit growth remained positive, the deployment in manufacturing MSEs continued to remain negative. The contraction for the month of July stood at minus 1.9 per cent to Rs 3.54 lakh crore from Rs 3.61 lakh crore in July 2019. However, the July credit had improved from Rs 3.52 lakh crore in June 2020. With respect to the growth in the financial year so far, the credit deployment contracted by minus 7.1 per cent from Rs 3.81 lakh crore in March 2020.

On the other hand, growth in credit deployment in services MSEs remained positive at 8.7 per cent (Rs 7.45 lakh crore) in July vis-a-vis Rs 6.85 lakh crore in the year-ago period. However, it had declined from 11.9 per cent year-on-year growth in June 2020 at Rs 7.79 lakh crore. Also, in the financial year so far, the credit growth in services MSEs contracted by minus 2.8 per cent from Rs 7.67 lakh crore in March 2020.

Meanwhile, 12 public sector banks, 24 private banks and 31 NBFCs have collectively disbursed Rs 1,18,138.64 crore into 25,01,999 MSME accounts as on September 10 under the Rs 3 lakh crore emergency credit line guarantee scheme, according to the data shared by the Finance Ministry. The amount and accounts sanctioned stood at Rs 1,63,226.49 crore and 42,01,576 MSMEs respectively. The scheme was launched in May while disbursements started late June for MSMEs with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore for standard accounts.