Credit growth to small businesses remains flat: RBI

Amid the Narendra Modi government’s stress on the credit boost to micro and small businesses (MSE), the gross bank credit grew by 6.2 per cent as on September 2019 from the year-ago period even as with respect to the current financial year, the growth contracted by 1 per cent. The credit outstanding as of September 27, 2019, to MSEs stood at Rs 10,56,600 crore up from Rs 9,94,504 crore as on September 28, 2018. The amount as on March 29, 2019, was Rs 10,67,175 crore, according to the RBI November bulletin.

However, the change in figures has been marginal. For August 2019, the growth remained at 6.1 per cent YoY while for July 2019, it stood at 7.8 per cent. Similarly, contraction in credit remained at 1.8 per cent for the two months since the beginning of the financial year.

“Small businesses are badly in need of funds not for setting up a new factory but for addressing the current liquidity crisis they are facing. The money is required for Opex, not Capex. Most SME lending outside India is based on ‘informational collateral’ instead of physical collateral. But bankers in India are not aware of businesses’  details or exposed to the sector’s intricacies.

They only care about seeking collateral to give loans. What’s required is to understand their business, capital need, payments cycle, who is their buyers, etc.,” Anil Bhardwaj, Secretary-General, Federation of Indian Micro and Small & Medium Enterprises told Financial Express Online.

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