Loan defaults by small businesses doubled in the last year, the Reserve Bank of India has said in response to a Right to Information query filed by The Indian Express. The amount of defaults has gone up from Rs 8,249 crore in March 2017 to Rs 16,118 crore in March 2018.
The central bank said public sector banks account for the bulk of these defaults. The outstanding advances to micro and small business increased 6.72% to Rs 10,49,796 crore by March 2018. In March 2017, the figure was Rs 9,83,655 crore.
In a separate study on micro, small and medium enterprises two weeks ago, the RBI had said the sector has witnessed two major shocks — demonetisation and the implementation of the of the Goods and Services Tax.
“For instance, contractual labour in both the wearing apparel and gems and jewellery sectors reportedly suffered as payments from employers became constrained after demonetisation,” said the study carried out by Harendra Behera and Garima Wahi of RBI’s Monetary Policy Department. “Similarly, the introduction of GST led to increase in compliance costs and other operating costs for MSMEs as most of them were brought into the tax net.”