Bikky Khosla | 13 Jul, 2021
Credit is the lifeline of MSMEs, and it is
particularly true amid the ongoing pandemic, combined with unpredictable market
situations. But unfortunately, credit availability has always remained a big
problem for the sector. Recent RBI data has brought this bitter truth again to
the fore. According to the central bank, bank credit growth to medium and small
enterprises for April declined -- for the first time since Covid struck last
year -- 2.2 percent y-o-y.
According to data released by the central
bank, banks deployed Rs 10.60 lakh crore in the first month of the financial
year 2021-22, against Rs 10.84 lakh crore in April 2020.
While such data is churned out regularly, what is more important is the fact
that despite several efforts by the government, the sector is still facing a
in the form of credit crisis.
still remains a lot of room to do more for our MSMEs, at least to help them recover
from the brunt of the pandemic.
Meanwhile, the RBI last week asked banks to
monitor their exposures to the retail and MSME sectors as both these sectors are
witnessing high stress although banks' exposure to better-rated
large borrowers is declining.
This reflects the fact that some sectors, including MSMEs, have
been hit by Covid-19 more severely than some others, and this is why the Centre, the state
governments and the banks – all should now come together to help the MSME
sector with adequate and timely credit.
It is also notable here that only 5 percent
of India's millions of MSMEs operate in the formal sector, and majority of the
remaining units are under-financed or financed through informal sources. Some
experts also point out that while fiscal benefits for the sector are welcome,
support in the form of direct credit is still inadequate. Also, banks still shy
away from lending to MSMEs. Solving all these ground-level issues is need of