Here's why private banks' SME credit has grown four times faster than PSBs'

Bankers say private lenders have more risk appetite, faster response times, and are aggressive on pricing

Private sector banks consistently clocked much higher growth rates in loans to micro, small and medium enterprise (MSME) than their public sector counterparts through financial year 2021-22 (FY22) and the first half of FY23. This was a period marked by the disruptions caused by the second wave of Covid-19 and the subsequent strong recovery.

According to the Reserve Bank of India’s (RBI’s) Financial Stability Report, released in December, while public sector banks (PSBs) reported a growth rate of around five per cent year-on-year (YoY) or lower, private banks expanded at a pace that was more than four times higher.