Credit and financing for MSMEs: The Financial Industry Development Council (FIDC), a representative body of Non-Bank Financial Companies (NBFCs) in India, on Tuesday urged the Reserve Bank of India (RBI) to extend the inclusion of bank credit to NBFCs for on-lending micro and small enterprises (MSEs) and agriculture as a priority sector for another year’s lending from March 2022. consider extending the bank lending waiver to NBFCs for on-lending to agriculture and MSE sectors will be counted as part of priority sector lending, as hitherto, for a further period until March 2023. »
The RBI in its “Development and Regulatory Policy Statement” in October last year announced the extension of the facility to March 2022 from September 2021. It had been extended on April 7 2021 to be valid until September 2021. “Given the increased traction seen in extending credit to underserved/unserved segments of the economy, it has been decided to extend this facility until March 31, 2022,” Shaktikanta Das had said in his October 2021 monetary policy speech.
“The situation for small businesses and agriculture after Covid continues to improve. Therefore, the extension will encourage banks to continue to lend more to NBFCs to on-lend to the MSE and agriculture sectors that have difficulty accessing formal credit. For these businesses, NBFCs are the final link in extending credit for working capital, business expansion, equipment purchase and other purposes,” said Mahesh Thakkar, Managing Director of FIDC at Financial Express Online.
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The RBI had allowed on-lending by NBFCs of up to Rs 20 lakh per MSE borrower and up to Rs 10 lakh per agricultural borrower.
Priority sector lending is primarily aimed at enabling bank credit to sectors such as MSEs, agriculture, education, housing, renewable energy, etc., which are prioritized over other sectors for economic growth. .
Meanwhile, the level of NPAs in the MSME sector increased from 8.6% in FY2019 to 12.6% and 12.5% in FY20 and FY20 respectively. 21 and should also stay around the same level for fiscal 22, according to a recent study by Assocham-Crisil mentioned. In fact, it had jumped sharply to 18.5% in September 2021 from 16.8% in March 2021. However, the MSME sector as a whole is expected to see 15-17% growth in revenue over the next year. 22 thanks to the recovery in demand following the resumption of economic activity with the gradual easing of Covid restrictions, the study notes.