The Reserve Bank of India (RBI) released its most recent statistics on sectoral deployment on Monday. It shows that bank credit deployed by scheduled commercial banks under priority sector lending to micro, small, and medium businesses (MSMEs) grew by 14.8% in August of this year compared to the same period last year. August 2023 saw a rise in priority credit to MSME from Rs 22.2 lakh crore to Rs 25.5 lakh crore.
Credit to micro and small businesses (MSEs) rose by 13.5% in the MSME category, from Rs 17.8 lakh crore in August 2023 to Rs 20.2 lakh crore in August. Similarly, over the same time, loans to medium-sized businesses increased by 20.8% to Rs 5.29 lakh crore from Rs 4.38 lakh crore.
Priority credit to the MSME sector increased by 3.7% in the current fiscal year compared to the Rs 24.6 lakh crore disbursed in March 2024. Since March of this year, credit growth has been 2.7% in the MSE category and 7.9% in the medium company segment.
However, Crisil had stated earlier this year that while moderate growth is projected in overall bank credit, bank loan growth to MSMEs in the current financial year is likely to slow down from the previous year. Estimates place the increase in the current fiscal year at 15%, compared to a strong 19% in the fiscal year 2024.
Significantly, RBI Governor Shaktikanta said at a gathering in August of this year that the central bank’s planned Unified Lending Interface (ULI) platform will strive to “enable frictionless credit” to a variety of sectors, namely MSMEs and agriculture. The platform will probably soon exit beta testing.
At a CII event earlier this month, RBI Deputy Governor Michael Debabrata Patra said that the country’s demand for MSMEs financing is around $1,955 billion ($1.9 trillion), of which debt-based demand is anticipated at $1,544 billion ($1.5 trillion).
Borrowers who favour funding from unreliable sources or financially unstable businesses account for half of this loan demand. This leaves MSMEs with a loan demand of $819 billion, of which formal credit providers like banks presently meet $289 billion of the market, according to Patra.
