Commercial credit enquiries by MSMEs hover around pre-Covid level after peaking in June post ECLGS launch

Credit and Finance for MSMEs: Commercial credit enquiries by micro, small, and medium enterprises (MSMEs) have bounced back and are maintaining pre-Covid19 levels. Following the sharp drop by 60 per cent in April 2020, the enquiry volume by MSMEs had surged to 58 per cent year-on-year (YoY) growth in June 2020 post the launch of the Emergency Credit Line Guarantee Scheme (ECLGS) by the government in May last year. The volume has stabilized to around 13 per cent YoY growth in December 2020, sustaining the growth rate of pre-Covid level, showed data from the Small Industries Development Bank of India (SIDBI).

The total on-balance sheet commercial lending exposure in India was Rs 71.25 lakh crore in September 2020 with a YoY growth rate of 2.1 per cent. The share of the MSME segment’s credit exposure stood at Rs 19.09 lakh crore as of September 2020 witnessing 5.7 per cent YoY growth. The segment wise growth in the MSME vertical was 7 per cent for enterprises with credit exposure of less than Rs 10 lakh, 9 per cent for businesses with credit exposure of Rs 10-50 lakh, similarly 8 per cent for units with Rs 50 lakh – 1 crore, 6.2 per cent for enterprises with Rs 1-10 crore, 5.6 per cent for businesses with exposure of Rs 10-25 crore, and 3.6 per cent for enterprises with exposure between Rs 25-50 crore, according to the data from SIDBI’s MSME Pulse report.

In line with credit demand, MSME loan originations indicated that during January and February 2020, the growth rate in terms of the number of new loan origination was more than 30 per cent. However, it reduced significantly in March and April post-Covid struck. Importantly, after the launch of the ECLGS scheme, credit originations, which peaked in June 2020 to 115 per cent YoY growth rate, contracted to around 20 per cent in September 2020 even as it was higher than the year-ago period.

“The credit growth to the MSME sector has been strong despite the impact of the Covid-19 pandemic and this has helped us to achieve encouraging financial performance with a boost to our loan book. We have also managed to keep our asset quality under check. Our focus will be on sustaining the growth and scalability with various measures targeted towards recovery and strengthening of the MSME ecosystem,” said V. Satya Venkata Rao, Deputy Managing Director, SIDBI.

SIDBI had reported a 9 per cent net profit growth to Rs 630 crore in Q3 FY21 from Rs 578 crore in Q3 FY20 despite the Covid impact on lending to MSMEs. The bank’s non-interest income had increased 16.7 per cent to Rs 154 crore in Q3 FY21 vis-à-vis Rs 132 crore in the year-ago period. For the nine-month period ended December 31, 2020, SIDBI reported a 38.4 per cent jump in net profit to Rs 2,165 crore from Rs 1,564 crore during the year-ago period.