MSMEs witness a 13 percent increase in outstanding loans in FY22: RBI report
RBI’s annual report also revealed that the ECLGS was used to clear the dues of vendors, restart businesses, pay salaries among other expenses.
The Reserve Bank of India’s (RBI) annual report for fiscal 2022 (FY 2022) revealed that while the number of borrower accounts of micro, small, and medium enterprises (MSMEs) reduced by an annual 36.9 percent, from 420 lakh in FY 2021 to 265 lakh in FY 2022, the outstanding loan amount grew by an annual 13.3 percent from Rs 17.83 lakh crore to Rs 20.22 lakh crore in FY 2022.
The outstanding loans by medium enterprises saw the highest jump of almost 36 percent. From nearly Rs 3.00 lakh crore in FY 2021 the amount rose up to a little over Rs 4.09 lakh crore
Additionally, the RBI annual report further stated that the micro-enterprises saw the maximum decrease in the number of accounts followed by small and medium enterprises respectively.
“There is a significant decrease in the number of accounts due to mandatory registration on Udyam portal under new MSME definition,” the report read.
The RBI also highlighted how relief measures to finance small businesses such as the Emergency Credit Line Guarantee Scheme (ECLGS) helped in keeping the overall health of the sector afloat. The demand for MSME loans increased sharply, particularly credit disbursements to small enterprises with loan sizes of less than Rs 10 lakh during the second quarter of FY 2021.
“Nearly half of these loans were used to clear the dues of vendors providing raw materials; one-third was used to restart businesses, and the remaining amount was used for payment of salaries and to meet other expenses," the report said.
Furthermore, small businesses with ECLGS accounts saw a higher transition from non-performing assets (NPA) to standard assets as compared to non-ECLGS accounts in FY 2022.
In March 2021, out of the total NPAs, 70 percent could not transition from NPA to standard assets among the non-ECLGS accounts, this number reduced considerably for the ECLGS accounts and is reported to be just 29 percent.
“A difference-in-difference analysis to estimate the causal effect of the ECLGS scheme on credit growth in the MSME sector vis-à-vis other sectors of the economy, based on monthly data from March 2016 to October 2021, reveals that several policy measures including the ECLGS contributed to about 35 percent and 23 percent of credit growth in the medium-scale industry, and micro and medium industry together, respectively,” the report noted.
The report also pointed out that the growth recorded in the sector’s demand could be attributed to the RBI’s and government’s policies to revive the sector.
Edited by Rajiv Bhuva
