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MSME Loans Surge Amidst Rising Costs
27 Mar
Summary
- MSMEs and industries are increasing working capital utilization.
- Input cost pressures are rising due to the US-Israel conflict.
- Sectors like hospitality and chemicals see higher drawdown of limits.
Lenders are observing a marked increase in the utilization of working capital limits by MSMEs and other industries. This trend is largely attributed to escalating input costs, a situation exacerbated by the ongoing US-Israel conflict.
As cash flow dynamics slow across the economy, MSMEs are increasingly depending on working capital to sustain their operations. This heightened reliance is not viewed as a solvency issue but rather an input-cost inflation challenge for these businesses.
Sectors including hospitality, ceramics, chemicals, steel, and fertilisers are anticipated to experience greater drawdowns of their existing credit limits. Furthermore, firms may require fresh working capital sanctions as they contend with rising expenses and tighter liquidity.
For domestic basmati rice exporters, Iran represents a significant market. Rising raw material and imported fertilizer prices are expected to boost working capital needs within this industry. Additionally, government subsidy outlays are projected to increase substantially.
Certain sectors, such as oil refining, aviation, and crude-linked industries, along with companies engaged in basmati rice, fruits, and nuts trade, could face significant impacts from escalating crude oil prices. The degree of this impact will hinge on each sector's capacity to pass on increased costs to consumers.
