MSME Loan: The Indian government has set a target for scheduled commercial banks and non-banking financial companies (NBFCs) to extend an additional Rs 1.54 lakh crore in credit to micro, small, and medium enterprises (MSMEs) during the current financial year (FY25).
There's not one measure which shall be less, whether it's policy or financial assistance, I want MSMEs to have regular communication with the @minmsme & the @FinMinIndia, so that nothing shall be left in terms of expectations which have to be met for the growth of MSMEs in this… pic.twitter.com/O3NQPcrO3k
— Nirmala Sitharaman Office (@nsitharamanoffc) November 9, 2024
Finance Minister Nirmala Sitharaman announced that banks and NBFCs should aim for total MSME credit growth of Rs 5.75 lakh crore in FY 2024-25, Rs 6.21 lakh crore in FY 2025-26, and Rs 7 lakh crore in FY 2026-27. The targets were discussed at the ‘National MSME Cluster Outreach’ event, organized jointly by the Department of Financial Services (DFS) under the Ministry of Finance and the Small Industries Development Bank of India (SIDBI). The Finance Minister highlighted the critical role MSMEs play in India’s economy, especially in terms of innovation, job creation, and bolstering the nation’s self-reliance.
MSME Loan Data
Gross bank credit by scheduled commercial banks to micro, small, and medium enterprises (MSMEs) under priority lending norms increased by 14.6% year-over-year, reaching Rs 26.01 lakh crore in September, up from Rs 22.68 lakh crore in the same period of FY23, according to the latest sectoral data from the Reserve Bank of India (RBI) released on Thursday.
In September, MSME priority lending accounted for 15.2% of India’s non-food credit, which totaled Rs 171 lakh crore for the month. RBI data indicates that credit to the micro and small enterprise (MSE) segment of the MSME sector grew by 13.1%, amounting to Rs 20.57 lakh crore, compared to Rs 18.18 lakh crore in September of the previous year. Similarly, credit to medium enterprises surged by 20.8% to Rs 5.43 lakh crore, up from Rs 4.49 lakh crore in September FY23. In August, MSME priority bank credit rose by 14.8%, reaching Rs 25.5 lakh crore, compared to August FY23.
To further encourage MSME credit growth, RBI Governor Shaktikanta Das, at an event in September, recommended that banks and financial institutions develop financial products and services tailored specifically for MSMEs. He emphasized the need for “flexible credit options, improved access to working capital, and financial support that aligns with the unique cash flow cycles and growth phases of MSMEs.”
“This approach could enable MSMEs to expand, increase productivity, and contribute more significantly to job creation,” noted Governor Das.
However, Crisil, a ratings agency, projected in May that MSME credit growth for FY24 may slow down from the previous year due to anticipated moderate growth in overall bank credit. Crisil estimates MSME credit growth for the current fiscal year at around 15%, compared to a robust 19% growth in FY23.
