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Alternative Investment

lenders: MSMEs’ big capex push accounts for 50% of new loans

Mumbai: Indian lenders are witnessing a revival of capital expenditure in the MSME segment, with up to 50% of fresh advances to this category of borrowers being utilised to create new capacities.

Banks and non-bank lenders said while big corporates are accessing the offshore market and alternative investment funds (AIF) for incremental capex, MSMEs that rely on the bank and NBFC funding are taking fresh term loans to add new plants and factories.

Latest central bank data showed that credit to medium enterprises expanded more than 30% on-year while loans to micro and small businesses climbed nearly 15% at the end of October.

“We are seeing demand for fresh capacity building in sectors such as warehouses, cold storage, processing and corporate-linked supply chains,” said Manish Kothari, head-commercial banking at


Reserve Bank of India (RBI) data, up to the period of October, showed outstanding credit to medium enterprises was at more than ₹2.2 lakh crore, having expanded more than 30% over last year. Also, credit to the micro and small sector was a little more than ₹5.5 lakh crore, translating into growth in excess of 20%.

“On the ground, we are seeing a capex revival in the MSME sector; the growth momentum is strong and new investments are definitely happening,” said Jairam Sridharan, managing director of Piramal Capital and Housing Finance. “We speak to MSMEs in midtown India. Entrepreneurs are looking at ways to add fresh capacity and they are not in a defensive mode at all.”

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