MUMBAI: The share of bank credit to micro and small enterprises (MSEs) has been shrinking since three years — from 5.9% in October 2015 to 4.5% in October 2018, data from the RBI show.
While it is clear the sector is facing problems due to the double whammy of demonetisation and GST, it’s unclear whether MSEs are hit by liquidity issues or whether banks do not find them credit-worthy.
In the first seven months of the current fiscal (up to October 26), outstanding loans to MSEs have come down by Rs 8,800 crore to Rs 3.64 lakh crore.
The reason why this decline has not been reflected in the credit to industry numbers is because banks have lent an additional Rs 5,100 crore to large businesses, which owe Rs 22.27 lakh crore — a big chunk of the Rs 26.96 lakh crore credit to the industry. Besides, businesses have raised an extra Rs 59,000 crore from banks by issuing bonds and commercial papers, with banks growing their corporate bond portfolios by 8% to Rs 7.27 lakh crore.
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