Reserve Bank data counters RBI claim Credit to small firms

Reserve Bank of India in a statement recently said that there is no sign of a liquidity crunch, but its latest data shows that banks’ credit outstanding to the Micro, Small and Medium Enterprises (MSMEs) sector has seen a contraction for the first time in 14 months in September 2018. This is the month IL&FS began defaulting on its outstanding dues.

According to RBI data, while the overall bank credit outstanding and that to the industry segment grew by 11.3 per cent and 2.3 per cent respectively in September 2018 (over September 2017), the credit outstanding to the MSME sector — which accounts for about 45 per cent of manufacturing output in the country and nearly 40 per cent of the total exports — contracted by 1.4 per cent during the month.