Gross bank credit deployed to MSMEs under priority sector lending norms in February increased by 15 per cent from the year-ago period, according to the latest monthly bulletin by the Reserve Bank of India (RBI). Banks deployed Rs 28 lakh crore in February this year in comparison to Rs 24.4 lakh crore deployed in February 2024. The deployment in February this year was 15.6 per cent of India’s total non-food credit worth Rs 179.4 lakh crore.
Credit to micro and small enterprises (MSEs) stood at Rs 22.2 lakh crore, growing by 13.5 per cent from Rs 19.5 lakh crore in February last year. For medium enterprises as well, credit deployment increased by 21.5 per cent to Rs 5.8 lakh crore from Rs 4.8 lakh crore.
According to a report by the State Bank of India earlier this month, MSME lending has surged from Rs 8.51 lakh crore in FY14 to Rs 27.25 lakh crore in FY24, and is projected to cross Rs 30 lakh crore in FY25.
Moreover, the share of MSME credit in total bank credit has jumped from 15.8 percent in FY14 to nearly 20 percent in FY24, the report said. The growth has “enabled businesses in smaller towns and rural areas to access financial support that was previously unavailable, strengthening India’s self-reliant economy and driving grassroots job creation,” it said.
Last month, the government had encouraged banks to provide loans up to Rs 10 lakh based on the digital footprint of MSMEs that involves data from GST, business cashflow, electricity bills, etc., as banks created their in-house credit assessment model. The announcement for banks to develop their own assessment model was made by Finance Minister Nirmala Sitharaman in the last year’s budget.
Earlier this month, the central bank issued draft guidelines for co-lending arrangements (CLA) to broaden the scope of joint partnerships between banks and NBFCs for priority sector lending. The proposed guidelines, which seek to expand this collaboration to all regulated entities (REs) and all loan categories, is expected to benefit MSMEs with improved availability of credit.