MSME credit grows by 3.5 percent on Quarter basis: Motilal Oswal Financial Services | MSME loan growth at 5.7% on yearly basis, Kovid-19 benefited from government scheme


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  • MSME Credit Grows By 3.5 Percent On Quarter Basis: Motilal Oswal Financial Services

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New Delhi16 minutes ago

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After the removal of the Kovid-19 ban, the business activities of small and big companies of all sectors are continuously increasing. The proof of this is that the micro, small and medium enterprises (MSME) sector is getting loans. According to Transunion Cibil’s latest MSME Pulse report, credit growth in this segment reached 5.7% on an annual basis. Whereas credit growth has been 3.5% on quarterly basis.

Benefit of government scheme

The Government launched the Emergency Credit Line Guarantee Scheme (ECLGS) to provide financial assistance to MSMEs during Kovid-19. According to the report, MSME has got a major benefit of this scheme. A loan of Rs 19.1 lakh crore has been given in this segment from April to September 2020. The micro segment has witnessed 8-9% credit growth on an annual basis. Apart from this, inquiries regarding loans have reached pre-Kovid level. By December 2020, it had grown by 13%.

Government banks lead in lending

According to the report, government or public sector banks have been at the forefront of lending to MSMEs since April. These banks have increased their stake in MSME loans. Private banks are also ahead in inquiry trend. According to the report, in private banks, loan-based inquiries grew at 22% year-on-year, while PSBs grew at 9%.


Loan approval rate also increased

The report said that the loan approval rate has also improved in the MSME segment due to the ECLGS scheme. However, with the improvement in the approval rate, the increase in the number of beneficiaries having civil rank of 7-10 has also increased the risk. However, the ratio of non-performing assets (NPA) has decreased in this segment. NPA in MSME segment was 13% in January 2020 which has come down to 12.1% in September 2020.

2.1 lakh crore loan approved under ECLGS

According to the latest data from the Finance Ministry, loans worth Rs 2.1 lakh crore have been approved to MSME under ECLGS. Out of this, 1.65 lakh crore rupees have also been disbursed. According to the ministry, public banks have given loans worth 612 billion rupees under ECLGS, while 808 billion rupees have been given by private banks.

Loan disbursement accelerated from large private banks

Brokerage firm Motilal Oswal says that loan disbursement has increased in the MSME segment due to a large private bank. SBI, HDFC Bank and ICICI Bank accounted for 57% of the loan growth in the MSME segment in the first 9 months of FY 2020. Private banks have recorded growth of 3-7% on a quarterly basis in loan disbursement under ECLGS. The brokerage firm has predicted that this growth will continue in FY 2022 and 2023 as well.


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