The Micro, Small and Medium Enterprise (MSME) sector in India has seen a significant increase in credit outstanding amount, reaching Rs 20.21 lakh crore. This represents a year-on-year growth rate of 6.6%, according to a report from TransUnion Cibil and Small Industries Development Bank of India (SIDBI). Similarly, the Reserve Bank of India (RBI) stated that credit growth for micro and small industries accelerated to 6.4% in June 2021.
An Overview of SIDBI and TransUnion CIBIL Limited
Small Industries Development Bank of India (SIDBI) was established in April 1990 under an Act of Indian Parliament. As a Principal Financial Institution, it is responsible for the promotion, financing, and development of the MSME sector, alongside coordinating the functions of similar institutions.
On the other hand, TransUnion CIBIL Limited is a credit information company in India, maintaining credit files on 600 million individuals and 32 million businesses.
Key Points in MSME Credit Growth
In the Financial Year (FY) 2021, loans worth Rs 9.5 lakh crore were disbursed to the MSME sector. This is a considerable increase compared to the Rs 6.8 lakh crore issued in FY 2020. The fastest-growing segment noted was the micro-segment with a 7.4% growth, followed by small and medium segments with growth rates of 6.8% and 5.8% respectively.
Sector Wise Analysis of Credit Growth
Agriculture and allied activities saw substantial credit growth of 11.4% in June 2021. Other industries such as food processing, gems & jewelry, glassware, leather products, and textiles saw high credit growth. However, sectors such as engineering, beverages & tobacco, metal products, cement products, construction, infrastructure, and vehicles experienced decelerated or contracted credit growth.
Regarding the service sector, the credit growth rate decreased to 2.9% in June 2021 from 10.7% in the previous year. This is primarily due to contraction in credit growth for commercial real estate, Non-Banking Financial Companies (NBFCs) and tourism-oriented businesses. Nonetheless, the trade segment maintained robust growth at 11.1%.
The Driving Force Behind the Credit Growth
The surge in credit offtake by MSMEs can be attributed to various government initiatives such as the Emergency Credit Line Guarantee Scheme (ECLGS). Launched as part of the Atmanirbhar Bharat Abhiyan package in May 2020, this scheme intended to alleviate the economic distress caused by the coronavirus pandemic. It offered credit support to various sectors, particularly MSMEs, struggling to meet operational liabilities due to the nationwide lockdown.
Other Supportive Programs for MSMEs
Several other initiatives have also contributed to aiding MSMEs. These include the Prime Minister’s Employment Generation Programme (PMEGP), Scheme of Fund for Regeneration of Traditional Industries (SFURTI), A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE), Interest Subvention Scheme for Incremental Credit to MSMEs, Credit Guarantee Scheme for Micro and Small Enterprises, CHAMPIONS portal, and MSME Samadhan.
