Bikky Khosla | 22 Feb, 2021
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.
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