Indian MSMEs contribute nearly 8% to the overall GDP of the country. Moreover, they are responsible for approximately 45% of the manufacturing output and almost 40% of the country’s exports. With such contribution, they deserve being called the backbone of the country.

MSMEs are not only important for the Indian economy, but they are also highly beneficial for the country’s socio-economic development. Firstly, they create employment opportunities at a time when work is hard to find. Secondly, it helps develop the semi-urban and rural areas of the country as well. This means that more opportunities are provided that need it. The best part of the MSME growth story is that it is sustainable. As per the government’s 2018-19 data, there are close to six crore MSMEs in India.

To make sure that MSMEs not only survive but also grow, the government, along with various lending institutions, make credit available to them. To maintain a record of this, lending institutions maintain what is referred to as a ‘book’. One such example is HDFC Bank.

HDFC Bank

The MSME book of HDFC Bank has seen a significant growth over recent time. It has grown a considerable 30% in the last year and touched the Rs. 2 lakh crore-mark towards the end of December. The main reason for such a boost is the ELCG scheme that was induced due to the pandemic. Under this scheme, the MSME book gave out more than Rs. 23,000 crore. As per the Bank, the push towards rural and semi-urban areas is also responsible for driving growth.

While this was the growth of the MSME in the year 2020, the conditions for the previous year were very different. Till December 2019, the MSME book of HDFC Bank had a position of Rs. 1.4 lakh crore. Compared with the 30% growth in 2020, this translates to a 10.6% increase in MSME lending. This makes HDFC bank the second-biggest lender in the country after SBI.

Moreover, due to the Banks’ efforts, its MSME lending growth rate has reached back to pre-pandemic levels. The Rs. 23,000 crore worth of loans disbursed have been distributed among approximately 1,10,000 customers. What is most special about this growth is that the book has grown from Rs. 1.4 lakh crore to Rs. 2 crore is just three to four months. The ECLG scheme has played a key role in this growth of Rs. 60,000 crore in such a short time. Moreover, with the growth percentage of 30%, the MSME book of HDFC bank is the fastest-growing vertical for the institution.

ELGS scheme

The simplest way to describe the ELGS scheme is to call it the government’s response to poor financial situation of MSMEs in the country during the pandemic. The scheme served as an emergency credit line worth Rs. 3 lakh crore. The government worked with various banks to make sure the credit reaches the right places and to the right people.

In the Lok Sabha, Union MSME minister Nitin Gadkari mentioned that out of the Rs. 3 lakh crore-plan, banks and other lending institutions have collectively sanctioned Rs. 2.46 lakh crore. The scheme is implemented by an agency called the National Credit Guarantee Trustee Company. However, according to data received from the agency, only Rs. 1.81 lakh crore was disbursed until February 28.

The scheme involves a 2% interest subvention. Moreover, it has a five-year tenure, of which, the first year has a moratorium on payment.

Through their partnership with various banks that are present in most parts of the country like HDFC bank, the government has tried to keep MSME lending balanced and present across a long list of reasons. The focus of the scheme is to make business financing available for MSMEs in semi-urban and rural regions. Visit Finserv MARKETS to know more about business loan and business loan eligibility .