NEW DELHI: State Bank of India’s economists have termed concerns that bank credit to small businesses is threatened, calling it a “myth” and adding that the sector has seen “stupendous” loan growth since GST.
“The myth is...regarding the credit growth to Micro and Small Enterprises (MSEs),” SBI economists said in a note. The note went on to say that credit growth to the sector has been “quite stupendous”, with incremental credit to MSEs under priority sector lending increased by five times to `1.23 lakh crore post the implementation of GST in July, 2017, compared to `25,700 crores during the corresponding period pre-GST.
The note went on to say that the deceleration in credit in the pre-GST period was partly due to an overall slowdown in economic activity, rising NPAs and reclassification of food and agro-processing units from MSME category to agriculture sector. The surge in loans post-GST shows a significant amount of MSMEs have been able to tap banks for credit, it noted.
At its November meet, the RBI central board decided to ask banks for some forbearance for classifying advances to MSME.