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Bank credit to micro, small enterprises continues to surge; jumps 27% in May from year-ago: RBI data

Credit and Finance for MSMEs: Year-on-year (YoY) growth in gross bank credit deployed to micro and small enterprises (MSEs) saw a significant jump of 27 per cent in May from 19.7 per cent in April, recent data on sectoral deployment of bank credit by the Reserve Bank of India (RBI) showed. Banks disbursed Rs 14.23 lakh crore in May 2022 from Rs 11.20 lakh crore in May 2021. In April, Rs 14.08 lakh crore was deployed to MSEs from Rs 11.77 lakh crore in April 2021. YoY growth in bank credit to MSEs has been surging since December 2021, indicating the negligible impact of the third Covid wave after declining for three straight months from September to November.

“MSME sector, which was hit hard by the pandemic, is showing signs of revival (with) aggregate credit to the sector witnessed a strong revival during Q4 2021- 22 supported by significant growth in lending by private banks,” RBI said in its latest Financial Stability Report launched earlier this week. 

“The upsurge of domestic demand and pick up in ancillary industries and service units has increased funding requirement of this sector, which provides employment to a large section of the population,” the report noted. 

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YoY growth in credit to medium enterprises stood at 64.8 per cent in May 2022 to Rs 3.57 lakh crore from Rs 2.16 lakh crore during the year-ago period. In comparison, Rs 3.54 lakh crore was deployed to medium businesses in April, up 65 per cent from Rs 2.15 lakh crore in April 2021.

The overall credit deployed to the MSME sector in May stood at Rs 17.81 lakh crore vis-a-vis Rs 17.63 lakh crore deployed in April and Rs 16.17 lakh crore in March. Meanwhile, MSMEs’ share in India’s gross bank credit of Rs 120.27 lakh crore also increased marginally to 14.80 per cent in May from 14.75 per cent share in April’s gross bank credit of Rs 119.54 lakh crore. 

Credit growth to other sectors including agriculture, housing, renewable energy, etc., under priority sector lending, was also positive in May while educational loans, social infrastructure, and export credit recorded negative growth.