Record Surge In Priority Sector Lending To MSMEs, INR 23.36 Lakh Crore Deployed In November

Scheduled Commercial Banks (SCBs) directed INR 23.36 lakh crore towards Priority Sector Lending in micro, small, and medium enterprises in November 2023, marking a 21.9 per cent surge from INR 19.16 lakh crore deployed in the same month the previous year, according to the data on sectoral credit deployment released by the Reserve Bank of India (RBI). In October 2023, INR 23.15 lakh crore was deployed in MSMEs under priority sector lending.

The November deployment of INR 23.36 lakh crore constituted 14.9 per cent of the total non-food credit of INR 155 lakh crore dispensed by banks during the month, compared to 14.8 per cent of INR 128 lakh crore non-food credit in November 2022.

Within the MSME credit domain for November, INR 18.76 lakh crore was allocated to micro and small enterprises, reflecting a robust growth of 23.2 per cent from the corresponding INR 15.23 lakh crore in November 2022. Concurrently, medium enterprises secured INR 4.60 lakh crore in bank credit during November, witnessing a notable 17.1 per cent increase from the INR 3.93 lakh crore deployed in the same month the previous year.

Gross NPAs Decreased

Along with credit expansion, the overall health of banks' MSME portfolios exhibited positive trends. According to the latest financial stability report from the RBI, the Gross Non-Performing Assets (GNPAs) for MSMEs decreased to 4.7 per cent in September 2023, compared to 6.8 per cent in March 2023 and 7.7 per cent in September 2022. In March 2022, the GNPA ratio was notably higher at 9.3 per cent.

However, the report highlighted a slight rise in the SMA-2 category (loans unpaid for over 60 days and up to 90 days) to 1.7 per cent in September 2023 from 0.9 per cent in March 2023.

Service, Trade Hit

The report also highlighted the aftermath of the government's Emergency Credit Line Guarantee Scheme (ECLGS), which concluded on March 31, 2023. Services and trade, constituting one-third of the ECLGS disbursements, remained stressed and accounted for nearly half of the total delinquencies.

Meanwhile, for the fiscal year 2022-23, NBFCs outpaced banks in credit growth to MSMEs, with a growth rate exceeding three times that of banks. The co-lending framework for priority sector lending, coupled with NBFCs' ability to offer customized financing solutions, facilitated increased credit flow to the MSME sector. As of March 2023, while bank credit growth to MSMEs was at 12.4 per cent, NBFCs exhibited a more robust credit growth rate of 42.4 per cent, as per the RBI's report on the performance of the banking sector during 2022-23 and 2023-24.