The Reserve Bank of India’s data on state-wise lending to Micro, Small and Medium Enterprises (MSMEs) over four years has shown that Karnataka is the only big state which cut loans to MSMEs over the period in question. The state has reduced loans by over Rs 800 crore in 2018. However, the Centre, other states, and the RBI have been stepping up efforts to tackle the capital crunch in the MSME sector, say media reports.
In 2014-15, Karnataka’s scheduled commercial banks lent around Rs 56,000 crore to MSMEs. It dropped to around Rs 51,000 crore in 2015-16, Rs 48,000 crore in 2016-17, and finally to Rs 47,000 crore in 2017-18. This shows Karnataka has been consistently reducing lending to the sector, which is a strong driver of economic growth.
In contrast, other states have increased lending to MSMEs between Rs 1,000 crore to Rs 3,000 over the last four years. Maharashtra, Gujarat, Kerala and Tamil Nadu have increased lending to MSMEs between 13 percent to 20 percent. Reports suggest that Telangana has increased loan disbursals by 32 percent.
Andhra Pradesh and Delhi were the other states to reduce loans to small industries in the same period. However, they have now begun increasing loans to businesses affected by demonetisation and the implementation of GST.
The RBI also recently allowed the recasting of loans to stressed MSMEs under the condition that the total fund and non-fund based exposure to the MSME borrowers does not exceed Rs 25 crore. The issue of restructuring of MSME accounts was initially discussed in the RBI board meeting on November 19. At the meeting, the central board, which met amid the ongoing tussle between the Finance Ministry and the central bank over various issues, discussed the restructuring scheme for stressed MSMEs.