Micro, small, and medium-sized businesses (MSMEs) are increasingly turning to banks for financial support as a result of growing inflation and skyrocketing costs for energy and raw materials. As a result, when compared to the equivalent quarter of FY2022, loan disbursals to MSMEs surged by 53% in the third quarter of fiscal 2022–23.
The MSME credit increased to Rs 1.45 lakh crore in the first three quarters of the fiscal year, up from Rs 94,815 crore, according to the most recent report from the State Level Bankers’ Committee (SLBC) Gujarat. Ahmedabad hosted the 176th SLBC meeting earlier this week.
“During the last two to three quarters, MSMEs have taken on much more credit. The main purpose of this is to meet working capital requirements. This is especially true for industries like textile, ceramic, and technical goods industries. A few organisations have also applied for bank funding for potential expansions, according to M M Bansal, convener of the SLBC Gujarat.
According to sources in SLBC Gujarat, the expansion has been especially fueled by private banks’ increased credit offtake for MSMEs. Bankers claimed that rather than MSMEs, major firms and industries had expanded most frequently. In fact, the first three quarters alone saw banks reach 137% of the MSMEs target disbursals set forth in the service area credit plan (SACP).
Industry insiders claim that longer payment cycles brought on by a global recessionary trend and a decline in some domestic market segments have also increased the need for working capital. For clarification, “Raw material costs have increased dramatically in the real estate, infrastructure, engineering, and chemicals industries,” said Pathik Patwari, president of GCCI. Costs for manufacturing and production have gone up as a result. But, payment cycles are lengthened. Many players have not yet received payment from clients in India or overseas for the goods they supplied. MSMEs don’t have large financial reserves, hence they require additional funding to maintain their operations.
