As the MSME sector charts a new story post-pandemic, the credit growth to MSMEs has also been distinctly and consistently higher on both, YoY basis as well as in comparison with credit growth to large industries, SBI Research says in its latest report.
Incentives provided by the Emergency Credit Line Guarantee Scheme (ECLGS), coupled with lower Gross Non-Performing Assets (GNPA) ratios, appear to have helped in boosting credit to MSMEs. The Centre's ECLGS scheme helped boost credit flow to MSMEs, thus saving around 14.6 lakh MSMEs accounts, the data shows.
In absolute terms, MSME loan accounts worth ₹2.2 lakh crore improved since the inception of ECLGS for the entire banking industry. "This means around 12% of the outstanding MSME credit has been saved from slipping into NPA because of the ECLG scheme, thus saving livelihood of 6.6 crore," says the special report titled 'The rise of the prodigal: How the MSME Sector is charting a new story post pandemic'.
As MSMEs grow in size, several units are also crossing the threshold of ₹250 crore turnover and turning into mid-sized corporate as per the new definition of MSME units. This reveals the integration of MSME units with a larger value chain as PLI (Production Linked Incentive Scheme) activity gathers momentum.
Notably, after changing the definition of MSMEs in 2020, the government also mandated all of them to register under the Udyam portal. The data shows the number of GST registrations in India is about 1.40 crore, whereas the current MSME units registered under the Udyam certification are about 1.33 crore. The government also launched the Udyam Assist Platform (UAP) recently to bring all the informal micro-enterprises into the formal ambit, which constitutes around 99% of the MSMEs without complex and complicated paperwork.
The UAP platform enables informal micro businesses, which aren’t registered under GST, to get a registration certificate from the government based on information available with banks/NBFCs.
With this initiative, around 5 crore informal micro-enterprises could benefit, with the states like West Bengal, Uttar Pradesh, Tamil Nadu, Karnataka and Andhra Pradesh being the top beneficiaries.
India has less than half the number of MSMEs when compared to China -- 64 million against 140 million Chinese enterprises -- with more than 99% in the micro category and would need substantial hand-holding to grow organically, the report opines, adding that it'll result in an MSME revolution in India.
"There is an urgent need to revamp the Credit Guarantee Scheme for the MSME sector...the U.S. Small Business Administration (US-SBA) could be the template for evolving CGTMSE as a friend-philosopher-guide-mentor for MSMEs proliferation, credit linkage, scaling and integration into the value chain."
As per the 73rd NSS Round Survey (215-16), there are 6.34 crore MSMEs in India of which 6.3 crore are micro-enterprises, around 99.47%. Around 3.3 lakh are small businesses while 0.01 lakh is medium enterprises. Rural India has around 3.25 crore MSMEs, while urban has around 3.09 crore, according to government data.