Bank Credit To Msmes Projected To Decelerate In Current Fiscal Year

(MENAFN- KNN India) Mumbai, May 29 (KNN)
Growth in bank credit to the Micro, Small and Medium Enterprises (MSME) sector is anticipated to moderate in the current fiscal year 2024-25, following a robust expansion witnessed in the previous year, according to the ratings agency Crisil.

The MSME segment, which accounts for approximately 16 per cent of overall bank credit disbursement, is estimated to register a credit growth of around 15 per cent in the current financial year, marking a slowdown from the impressive 19 per cent growth recorded in fiscal 2023-24.

Crisil cited several factors that are expected to support credit growth in the MSME sector, including a revival in downstream capital expenditure, the sector's role in the government's 'Atmanirbhar Bharat' initiative, and the benefits accrued from the Productivity-Linked Incentive scheme.

Additionally, greater formalisation of the sector, accompanied by improving digital public infrastructure, has continuously expanded the addressable base for banks.

However, the projected deceleration in MSME credit growth coincides with an anticipated moderation in overall bank credit growth, which is expected to slow by around 200 basis points to approximately 14 per cent in the current fiscal year, following an estimated robust growth of around 16 per cent in the previous year.

Crisil attributed the expected moderation in overall credit growth to factors such as a high base effect, a revision in risk weights, and a somewhat lower GDP growth forecast for the Indian economy.

While credit growth to the corporate sector is likely to remain steady at around 13 per cent, the retail segment, which is the second-largest contributor to bank credit, is expected to grow at a marginally lower rate of around 16 per cent, compared to approximately 17 per cent in the previous fiscal year.

Nonetheless, retail credit is projected to remain the fastest-growing segment for banks.

Commenting on the estimates, Ajit Velonie, Senior Director at CRISIL Ratings, stated that growth in corporate credit would be supported by private sector industrial capital expenditure in fiscal 2024-25, underpinned by expectations of a solid GDP growth rate of 6.8 per cent, although lower than the estimated 7.6 per cent in fiscal 2023-24.

The anticipated pick-up in capital expenditure should offset the impact of lower growth in bank funding to non-banking financial companies (NBFCs) due to the 25 percentage points higher risk weight on lending to higher-rated NBFCs, he added.

(KNN Bureau)


KNN India

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