Credit and Finance for MSMEs: In January 2021, the year-on-year increase in gross bank credit deployment to micro and small enterprises (MSEs) remained above 6%. According to the Reserve Bank of India’s March 2021 bulletin, banks deployed Rs 11.48 lakh crore in credit in January, up 6.4 percent from Rs 10.79 lakh crore in January 2020. However, after growing at a rate of 6.6 percent in December, January YoY growth fell by 0.2 percent. In December 2020, the deployment was Rs 11.31 lakh crore, up from Rs 10.61 lakh crore the previous year. Importantly, credit growth in January for the fiscal year 2020-21 was finally positive.
Even though it improved from November’s minus 2.4 percent growth and minus 2.1 percent growth in October, growth remained contracted until December 2020 in the financial year. Bank credit to MSEs stood at Rs 11.49 lakh crore as of March 27, 2020.
In January 2021, MSEs accounted for 12.09 percent of the total Rs 94.97 lakh crore gross bank credit deployed, down from 12.11 percent in December 2020. The government’s Emergency Credit Line Guarantee Scheme (ECLGS) and Credit Guarantee Scheme for Subordinate Debt (CGSSD) were launched last year and “have been duly supported by various monetary and regulatory measures by the Reserve Bank in the form of interest rate cuts, higher structural and durable liquidity, debt servicing moratoriums, asset classification standstills, and loan restructuring pacts.” These steps will not only help to reduce stress, but they will also help to prevent it.
“These measures will not only help to alleviate stress in the sector, but will also open up new opportunities,” RBI Governor ShaktiKanta Das said at a Bombay Chamber of Commerce and Industry event. The deployment to MSEs in the manufacturing and services industries was not disclosed in the January bulletin.
According to the MSME Ministry’s FY21 annual report, there were 6.33 crore unincorporated nonagriculture MSMEs in India in 2015-16, according to the National Sample Survey (NSS) 73rd round, conducted by the National Sample Survey Office, with 1.96 crore in manufacturing, 0.03 lakh in non-captive electricity generation and transmission, 2.30 crore in trade, and 2.06 crore in other services. The annual report noted that this excluded MSMEs registered under (a) Sections 2m(i) and 2m(ii) of the Factories Act, 1948, (b) Sections 2m(i) and 2m(ii) of the Companies Act, 1956, and (c) building operations falling under Section F of the National Industrial Classification (NIC) 2008.
