IMPACT OF PUBLIC SECTOR BANK CREDIT FACILITIES ON THE GROWTH PERFORMANCE OF MSMES IN THE VIDARBHA REGION: AN EMPIRICAL STUDY

Abstract

MSMEs are important components of regional economic growth in terms of job creation, income generation, and industrial diversification. In some of the places like Vidarbha, formal finance access is a decisive factor of MSME development and survival. This paper explores the effects of PSB credit facilities on the performance of MSMEs growth in the Vidarbha region, in an empirical research. The study considers the influence of bank credit on key criteria of growth such as sales turnover, the number of employment, and capital investment, using the primary data gathered on the sampled MSMEs. The evaluation of the relationship between credit variables and MSME performance is done using statistical tools like descriptive analysis, correlation and regression techniques; variables used on credit are credit amount, interest rate and timeliness of disbursement. The results indicate a strong positive relationship between PSB credit and the growth of MSMEs in which credit adequacy and on time disbursement prove to be the most critical. Increased interest rates and reduced use of credit guarantee schemes however are seen to limit the optimum growth performances. This paper has concluded that although PSB credit is an important tool in the development of MSMEs in Vidarbha, its efficiency should be augmented with the best processes by enhancing affordability, efficiency and additional complementary support processes. The results provide a useful policy to those in policymaking, bankers, and development agencies in order to empower MSME financing, and enhance inclusive development at the regional level.