/MSME credit up on Govt guarantee

MSME credit up on Govt guarantee

(This story originally appeared in on Feb 19, 2021)

MUMBAI: There has been a revival in bank credit to small businesses driven by public sector banks on the back of the government’s emergency credit line guarantee scheme (ECLGS).

According to TransUnion Cibil’s report, credit to small businesses grew twice as fast as advances to large borrowers. “The on-balance sheet commercial lending exposure in India stood at Rs 71.3 lakh crore in September 2020 with year-on-year growth of 2.1%. MSME segment’s credit exposure is Rs 19 lakh crore, showing year on year growth of 5.7% and this credit growth is observed across all the sub-segments of MSME lending,” the report said.

The highest year-on-year growth of 9% was seen in the category of small businesses with a loan exposure of between Rs 10 lakh to Rs 50 lakh. This was followed by the Rs 50 lakh to Rs 1 crore segment which saw a growth of 8%.

According to TransUnion Cibil, the stimulus package announced by the government through ECLGS has helped credit demand and supply bounce back to pre-Covid levels. It added that commercial credit enquiries in January 2021 have settled at pre-Covid levels.

“The resurgence in MSME credit growth, which is back at pre-pandemic levels, is a very promising indicator of economic recovery in our markets. …Budget announcement by the FM have doubled the contribution to the MSME sector over last year, which shall further provide much needed financial support to the sector,” said Rajesh Kumar, MD & CEO, TransUnion Cibil.

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