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Bank credit to MSMEs jump 14% YoY in Apr-Dec FY23; micro units major beneficiaries: RBI annual report

Credit and finance for MSMEs: 45 per cent of the total loan amount to MSMEs in FY23 (till December) was deployed to 1.93 crore micro units.

Credit and finance for MSMEs: Credit to micro, small and medium enterprises (MSMEs) by scheduled commercial banks increased by 14.2 per cent year-on-year (YoY) during the April-December period of the financial year 2022-23 from 11.7 per cent in the corresponding period of the previous year, according to the Reserve Bank of India’s (RBI) FY23 annual report published on Tuesday.

Bank credit to MSMEs till the end of December in FY23 stood at Rs 21.5 lakh crore to 2.13 crore loan accounts vis-a-vis Rs 18.8 lakh crore to 2.47 crore accounts till December FY22. Overall, Rs 20.1 lakh crore were deployed to 2.64 crore MSME accounts in the entire FY22 in comparison to Rs 17.8 lakh crore to 4.20 crore accounts in FY21.

“Increasing the flow of credit to the micro, small and medium enterprises (MSMEs) has been a policy priority of the Reserve Bank and the government of India,” said RBI in its report.

45 per cent (Rs 9.78 lakh crore) of the total loan amount to MSMEs in FY23 (till December) was deployed to 1.93 crore micro units while 34 per cent (Rs 7.34 lakh crore) of the amount was deployed to 16.83 lakh small enterprises and only 20 per cent (Rs 4.37 lakh crore) was deployed to 3.20 lakh medium enterprises. 

Importantly, with a view to facilitating cash flow-based lending to MSMEs, the goods and services tax network (GSTN) was included as a FIP (financial information provider) under the Account Aggregator (AA) framework, RBI said. Other FIPs in the framework were banks, NBFCs, asset management companies, depositories, insurance companies, pension funds, etc. 

In March this year, the RBI’s deputy governor M. Rajeshwar Rao had called for addressing the vast opportunity to fulfilling the existing credit gap in the MSME sector by banks and other financial institutions. “This has to be seen as an area of opportunity by the banks and other financial institutions,” Rao said highlighting the challenges and opportunities in driving financial inclusion in the country in his address at the 31st Annual Management Convention of Thrissur Management Association. 

The total credit gap in the MSME sector so far was $530 billion out of the total addressable credit demand of $819 billion, of which only $289 billion MSME loan demand was fulfilled through formal credit lenders such as private banks, public banks and NBFCs, said investment banking firm Avendus Capital in a thought paper on MSME lending in April this year.