If we go by latest statistics, it seems the credit scenario for the Micro, Small and Medium Enterprise (MSME) sector is gradually improving. During the pandemic period, the sector went through the toughest time ever, but in 2021-22 credit disbursement to MSMEs rose 32%. Priority sector lending to MSMEs also rose 5% between March-August 2022-23, and now with some latest data, this positive trend seems to be confirmed.

According to the MSME ministry, credit flow to the sector under the Credit Guarantee Scheme (CGS), under which collateral-free credit is provided to MSMEs, has increased nearly to the pre-Covid levels in term of amount of loan guarantees approved. According to official data, an amount of Rs 45,043 crore was approved over the first half of the current fiscal. This data is encouraging.

Similarly, under the Mudra scheme, loan disbursal witnessed around 8% increase during the first half of the current financial year. Under this scheme banks, NBFC and other lending institutions disbursed loans worth Rs 1.58 lakh crore as of October 7. It is also encouraging that under the scheme NPA percentage came down to 3.17% y-o-y (from 3.61%) and gross NPA in the MSME sector improved to 9.3% y-o-y in March 2022 (from 10.8%).

Another data set shows that under SIDBI's 59-minute loan approval scheme, MSMEs were sanctioned 2,42,812 loans amounting to Rs 82,822 crore as of September 30, 2022 against 2,34,905 loans amounting to Rs 78,409 crore sanctioned as of September 30, 2021. Loan disbursal by the microfinance sector has also improved, with the sector recording 88.9% growth in loan disbursal, amounting to Rs 49,788 crore during April-June 2022-23.

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