Credit and Finance for MSMEs: The year-on-year development in gross bank credit deployment to micro and modest enterprises (MSEs) for the month of February 2021 was highest in the course of the 11-month period of the monetary year 2020-21. Rs 11.31 lakh crore deployed in bank credit to MSEs in February was up by 6.9 per cent from Rs 10.58 lakh crore deployed in February 2020, according to the April bulletin by the Reserve Bank of India. The prior higher was 6.8 per cent for October 2020. The February deployment was also up from 6.4 per cent development registered in January 2021. The credit deployed in January stood at Rs 11.48 lakh crore vis-a-vis Rs 10.79 lakh crore in January 2020. Importantly, the credit development in February 2021 because March 2020 stood at 4.8 per cent, down from 6.5 per cent in January even as the development had remained contracted till December 2020. As of March 27, 2020, bank credit to MSEs stood at Rs 10.80 lakh crore.
“RBI has been very proactive in listening to MSMEs and seeking inputs in terms of support required. There was a fair amount of optimism particularly among medium enterprises while small enterprises were crawling and continue to struggle and many of them don’t even qualify for credit intake during Covid. However medium enterprises had started recovering and that’s why offtake in February was good. What interesting to see will be offtake for March and April,” Rajiv Podar, Managing Director, Podar Enterprise and President, Indian Merchants’ Chamber (IMC) Chamber of Commerce and Industry told TheSpuzz Online. IMC has 5,000 direct members and 150 affiliated chambers reaching out to 4 lakh corporations out of which more than 90 per cent are MSMEs. Podar Enterprise is an advisory and consulting firm with corporations in education, housing and sanitation, sports, water, and so forth.
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However, the share of MSEs in the general gross bank credit continued to decline. Out of Rs 95.69 lakh crore gross bank credit outstanding as of February 26, 2020, MSEs’ share stood at 11.8 per cent down from 12.09 per cent share in the general Rs 94.97 lakh crore gross bank credit deployed in January 2021 and 12.11 per cent in December 2020. According to the Monetary Policy report this month, bank lending to MSMEs has enhanced with improved utilisation beneath the government’s Emergency Credit Line Guarantee Scheme (ECLGS) to meet working capital specifications. As of February 28, 2021, the utilisation beneath ECLGS stood at 82 per cent.
TheSpuzz Online had reported last month that the quantity of loan sanctioned beneath the ECLGS scheme stood at Rs 2.46 lakh crore till February-finish, as per the info shared by the MSME Minister Nitin Gadkari in a written reply to a query in the Rajya Sabha. Out of the 92.27 lakh total borrowers beneath ECLGS as of February 28, 87.50 lakh (95 per cent) borrowers have been MSMEs. While the government had lately extended the ECLGS scheme till June 30, 2021, it may improve banks’ exposure to stressed MSME loans amid the second wave of the Covid pandemic, according to rating agency Fitch Ratings. “Extension of the MSME refinancing scheme until 30 June 2021 will alleviate short-term pain, but potentially add to the sector’s exposure to stressed MSMEs, which was around 8.5% of loans (9MFY21) as per Fitch’s estimate,” the agency stated in a statement.