September bank credit to micro, small businesses up 6.7% from year-ago even as growth in FY21 contracts

Credit and Finance for MSMEs: Year-on-year gross bank credit to micro and small enterprises (MSEs) continued to see steady growth in September. From Rs 10.56 lakh crore as on September 27, 2019, the deployment increased 6.7 per cent to Rs 11.27 lakh crore as on September 25, 2020, the latest data from the Reserve Bank of India showed. The credit growth in August was 5.4 per cent to Rs 11.04 lakh crore from Rs 10.48 lakh crore during the year-ago period while July deployment was 5.1 per cent more from Rs 10.47 lakh crore during July 2019. However, the September 2020 growth was contracted by 1.9 per cent in the financial year 2020-21 so far, RBI’s November bulletin showed. Rs 11.49 lakh crore were lent to MSEs as of March 27, 2020.

While the overall credit deployment continued to scale north, deployment to manufacturing MSEs remained in the red. The credit growth in September fell by minus 0.1 per cent to Rs 3.60 lakh crore from Rs 3.61 lakh crore in September 2019. The decline in the FY21 so far was minus 5.5 per cent from Rs 3.81 lakh crore deployed in March 2020. The contraction for August and July this year stood at 1.2 per cent and 1.9 per cent respectively from the year-ago periods. Manufacturing MSEs were deployed Rs 3.54 lakh crore in August 2020 and Rs 3.54 lakh crore in July 2020.

Nonetheless, lending to services MSEs remained in green in September 2020. The year-on-year deployment grew 10.2 per cent from Rs 6.95 lakh crore to Rs 7.66 lakh crore. The credit growth in August 2020 was 8.8 per cent to Rs 7.49 lakh crore from Rs 3.58 lakh crore in the year-ago period. Similarly, July 2020 credit stood at Rs 7.45 lakh crore — 8.7 per cent up from Rs 6.85 lakh crore in July 2019. However, the credit growth in FY21 so far for September 2020 fell 0.2 per cent from Rs 7.67 lakh crore in March 2020.

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Meanwhile, the Finance Minister Nirmala Sitharaman had last week announced a further extension to the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS). The scheme was earlier given extension till November-end from October 31, 2020, but was last week further extended till March 31, 2021. Under the scheme, banks and NBFCs had sanctioned loans worth Rs 2.05 lakh crore to 61 lakh borrowers including MSMEs, individuals, Mudra enterprises and other businesses as on November 12, 2020. The amount disbursed, out of the sanctioned amount, till November 12 stood at Rs 1.52 lakh crore.