Credit growth to the Micro, Small and Medium Enterprise (MSME) sector is improving to the pre-COVID levels, a latest report indicates. The sector's credit exposure stood at 19.09 lakh crore as of September 2020, showing 5.7 YoY growth. This growth rate is much higher than that of the total on-balance-sheet commercial lending exposure which stood at Rs 71.25 lakh crore, clocking a growth rate of 2.1 percent YoY. This improved credit scenario is, no doubt, a big relief to our MSMEs.

MSME Pulse Report's latest edition, released by TransUnion CIBIL, adds that while the nation-wide lockdown imposed during COVID-19 stalled credit demand during the March- May, 2020 period, the stimulus package announced by the government through various schemes like ECLGS has helped credit demand and supply bounce back to the pre-pandemic levels. It adds that increase in overall credit enquiries also suggest credit revival in the MSME sector, with enquiries bouncing back considerably in June, 2020.

There is little doubt that the ECLGS scheme significantly contributed to this improved credit scenario. The first round of this scheme, announced in May-2020, aimed at providing Rs 3 lakh crore worth of collateral-free loans to MSMEs, and by September, 21 of the year, total Rs 1.77 lakh crore was sanctioned (Rs 1,25,425 crore disbursed) to the sector. These figures tell the whole story. The Finance Minister, herself, monitored the process from time to time, and this definitely acted as a catalyst.

The report points out that public sector banks played an early role in MSME lending during the pandemic. It adds that the last year saw deep penetration of credit with 'existing-to-bank borrowers' firms and non-metro regions are leading the resurgence of credit. Also, MSME profile and lending dynamics have changed with average loan size decreasing and bank approval rate increasing. These changing trends, no doubt, are the result of the COVID-effects on the overall economy as well as on the MSME sector.