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Loans to small biz contracted by 7.1%

Loans outstanding to micro, small and medium enterprise (MSME) sector fell by ₹34,627 crore during the nationwide lockdown despite the government pushing banks to provide loans on easier terms to small businesses affected by the pandemic.

The latest disaggregated credit data released by the Reserve Bank of India (RBI) showed that loans to small businesses in the industries segment fell 7.1% to ₹4.52 lakh crore as of May 22 from ₹4.87 lakh crore as on March 27.

Since banks started working on the government’s guaranteed credit scheme from June 1, data on those disbursals are not reflected by RBI.

Data showed that even after banks began their own Covid-19 emergency credit lines after the lockdown was eased, it did not alter their existing risk-aversion towards small businesses.

Madan Sabnavis, chief economist at Care Ratings, said the decline reinforces the view that despite starting their own emergency credit line schemes, banks had not opened their purse strings for MSMEs. Lenders have sanctioned ₹1.01 lakh crore in guaranteed loans to small businesses.

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