Small and large industries propelled industrial credit growth in H2 FY24: Eco Survey
The government aims to support MSMEs through sector wide integration and a composite criterion. The eco survey stated that TReDS platform boosted liquidity by discounting Rs 2.9 lakh crore of MSME invoices.
The government aims to enhance the focus on critical policy interventions like integrating the informal sector with the formal sector, the survey said.
New Delhi: Industrial credit growth picked up in H2 of FY24, registering 8.5% growth in March 2024, compared with 5.2% a year ago, driven by an increase in bank credit to small and large industries, according to the Economic Survey 2023-2024, tabled on Monday in Parliament by Finance Minister Nirmala Sitharaman.
The survey highlighted that collateral-free loans, backed by 100% credit guarantee under the Emergency Credit Linked Guarantee Scheme (ECLGS), have played a key role in facilitating the growth of credit disbursal. Additionally, the availability of enriched and timely credit data and rapid implementation of digital lending infrastructure have significantly contributed towards enhancing lender confidence.
Bank credit disbursal to the services sector remained resilient despite a slowdown in credit growth to NBFCs. Within the services sector, credit disbursal to the commercial real estate and trade sub-sectors improved in H2 of FY24. Personal loans and NBFCs have the largest share of credit disbursed by banks. Within personal loans, housing loan growth remained range-bound during FY24, with signs of improvement in April and May 2024.
In the coming years, the government predicts the MSME sector to benefit from the advancement of technologies, such as the Open Credit Enablement Network (OCEN), resulting in increased credit flow.
The annual economic survey has this time mentioned the key initiatives undertaken to ease credit pressure on small firms. These include the Trade Receivables Discounting System (TReDS), a digital platform that facilitates the discounting of MSMEs’ trade receivables through multiple financiers to meet liquidity and working capital requirements. At least 98 lakh invoices amounting to Rs 2.9 lakh crore have been discounted on TReDS platforms as of March 31, 2024, said the survey.
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The government aims to enhance the focus on critical policy interventions like integrating the informal sector with the formal sector, it said. For this, the survey pointed out that from July 1, 2020, MSMEs have been defined as per a composite criterion of turnover and investment in plant and machinery/equipment. This is aimed to bring numerous entrepreneurs under the ambit of the formal banking sector, which will facilitate the flow of credit to the industry at subsidised rates, the survey added.
