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Banks meet 25% of credit target as MSME activities pick up

Along with agriculture, housing and education, lending to MSMEs is a priority sector for banks for extension of credit facility.

Credit uptake in the Micro, Small and Medium Scale Enterprises (MSMEs) in Maharashtra is showing signs of recovery with banks meeting 25 per cent of their Rs 2,49,137.75-crore target for the financial year 2021-22 in the first five months of the fiscal. Banks in the state have reported credit uptake of Rs 61,274.53 crore by the MSMEs, which translates into meeting 25 per cent of their target.
Along with agriculture, housing and education, lending to MSMEs is a priority sector for banks for extension of credit facility. Given the fact that the sector is the biggest employment generator in the country after agriculture, the government makes special plans for the betterment of the sector.
The latest credit uptake report published by the State Level Bankers Conference (SLBC) — the apex authority of bankers which decides on credit outlay to sectors — showed a healthy 25 per cent achievement in targets. Private banks have performed better than public sector banks in terms of credit extension — lending Rs 27,030.72 crore of their Rs 99,460.42 crore target (27 per cent). Public sector banks have managed to meet 24 per cent of their Rs 1,41,609.54 crore target.
Last year, in view of the Covid-19 pandemic, Union finance minister Nirmala Sitharaman had announced a Rs 20 lakh-crore package for the sector to help it tide over the crisis. This included a Rs 3 lakh crore credit to the sector under the Emergency Credit Line guarantee and another Rs 20,000 crore subordinate debt for stressed MSMEs. For Maharashtra, banks have earmarked Rs 23,604.29 crore for the emergency credit line guarantee of which Rs 17,620.46 crore have been already disbursed to the units.
The green shoots in the sector, Prashant Girbane, director general of the Mahratta Chamber of Commerce Industries and Agriculture (MCCIA), said, was in tandem with the observation of industry insiders. “The unlocking has led to removal of supply constraints in the markets. Thus, the units are able to function at optimum capacity,” he said.
Also, unlocking and easing of constraints across the world has led to demand picking up, which has seen MSMEs increasing their working capital by means of increased credit uptake. “In the longer run, we expect to see MSMEs increase their production capacity with newer investments, which would see an increase in term loan disbursement,” Girbane added.