Credit and finance for MSMEs: The compound annual growth rate (CAGR) in bank credit to MSMEs during the 2019-22 period was 12 per cent in comparison to a mere 3 per cent for corporate credit.
Credit and finance for MSMEs: Bank credit to MSMEs is expected to grow at a “reasonable clip” of 16-18 per cent during the current fiscal and FY24 given the MSMEs’ role in Atmanirbhar Bharat initiative and the flow-through impact of schemes such as the Productivity Linked Incentive (PLI) scheme should sustain credit demand, according to credit rating agency Crisil. The compound annual growth rate (CAGR) in bank credit to MSMEs during the 2019-22 period was 12 per cent in comparison to a mere 3 per cent for corporate credit.
The MSME credit growth in FY23 and FY24 will be higher than the 10-12 per cent growth expected in credit to the corporate segment during the two fiscals, Crisil said in a report on Tuesday.
The credit growth estimate by Crisil in the MSME segment also echoes the government’s perspective. The Finance Ministry in its Monthly Economic Review for September 2022 noted that the government’s post-Covid credit scheme for MSMEs Emergency Credit Line Guarantee Scheme (ECLGS) till March 31, 2023, is expected to keep the credit appetite of MSMEs robust. The credit offtake by MSMEs, which was subdued until the second quarter of the financial year 2020-21 due to Covid, had increased substantially post-ECLGS introduction.
The RBI data on sectoral deployment also continues to show healthy credit growth to MSMEs. During September, bank credit to MSMEs stood at Rs 18.55 lakh crore, up 27 per cent from Rs 14.61 lakh crore in September 2021, FE Aspire had reported earlier this month.
Meanwhile, overall bank credit during FY23 and FY24 is expected to jump by around 15 per cent on the back of broad-based economic recovery and stronger, cleaner balance sheets that allow lenders to expand credit. Crisil said the expected growth also factors around 7 per cent expected increase in India’s gross domestic product (GDP) this fiscal, as well as impetus to credit growth from the government’s infrastructure push, higher working capital demand in a high-inflation environment, and some substitution of debt capital market borrowings.
“This year, the additional working capital requirement due to high inflation and move from the bond markets to bank loans, given the interest rate movements, are driving growth, though off a low base. On the other hand, next fiscal should see a revival in private sector capex, which then will become the key driver for higher corporate credit growth,” said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings.