Chennai/Mumbai: Due to GST rate cut, MSMEs are seeking additional funding from banks for expansion. After the changes in GST, banks have seen an increase in inquiries for advances from MSMEs. This comes at a time when the lender is nearing its annual target for the MSME sector in the first half of the current financial year. For example, state-owned Indian Overseas Bank has touched its MSME portfolio to Rs 48,000 crore by September 30, 2025, an increase of 16.7% from the total target of Rs 51,000 crore for the full financial year.
Indian Overseas Bank MD and CEO Ajay Kumar Srivastava said the government has taken several initiatives to accelerate MSME growth, such as their classification and turnover. Noting that the bank is likely to see its MSME portfolio reach Rs 55,000 crore this financial year, he said, GST will be one of the key factors. “We are focusing on the manufacturing (MSME) sector,” he said.To target the high-growth MSME segment, the country’s largest lender SBI has launched digital MSME loans. These loans provide end-to-end approval to MSMEs in 45 minutes. The bank has processed about 2.3 lakh such accounts with a credit limit of Rs 74,434 crore till August 2025. Indian Bank MD and CEO Binod Kumar said, there has been a good trend from the MSME side, with growth tripling from 5-6% year-on-year to about 17% (FY25 vs FY26). “We are mainly seeing demand from the services sector including hospitality. This is due to their expansion plans or setting up new hotels before and after GST 2.0. Major demand is also coming from ancillary units. We will exceed our target for MSMEs this year,” he said. PNB has launched several products, including comprehensive financing up to Rs 100 crore, digital MSME loans offering paperless loans up to Rs 25 lakh. The bank has also introduced a fully digital MSME loan of up to Rs 5 crore backed by CGTMSE guarantee and at concessional rates.Bankers said another reason for the emphasis on MSME loans is that the new rules on expected loan losses make it less capital intensive for banks to lend to MSMEs.
