SBI report rebuffs credit supply concerns to SMEs

Mumbai, Dec. 4: Economists at SBI on Tuesday termed concerns on credit supply to small businesses as a “myth” and said the sector has had a “stupendous” loan growth since GST.

The commentary comes amid concerns on the state of small businesses sector post-GST, which also led the Reserve Bank of India (RBI) board to decide on a special dispensation on asset quality.

“The myth is... regarding the credit growth to Micro and Small Enterprises (MSEs),” its economists said in a note.

Calling the credit growth to the sector as “quite stupendous”, the note said post the July

2017 implementation of GST, incremental credit to MSEs under priority sector lending has increased by five times to `1.23 lakh crores compared to

`25,700 crores during the corresponding period preGST.

The deceleration in credit in the pre-GST period was partly due to overall slowdown in economic activity, rising NPAs and reclassification of food and agro-processing units from MSME category to agriculture sector, it said.

The surge in loans postGST shows a significant amount of MSMEs have been able to tap banks for credit, it justified.

At its November meet, the RBI central board decided to ask banks for some forbearance for classifying advances to MSME.