GST SHOCKER: MSMEs Explode with Loan Demand Post-Rate Cut – Banks Race to Keep Up!

Author

Simar Singh | Whalesbook News Team

Detailed Coverage:

The recent Goods and Services Tax (GST) rate adjustments are spurring a significant increase in demand for bank loans among Micro, Small, and Medium Enterprises (MSMEs) as they look to fund expansion plans. Banks across India have reported a substantial rise in loan enquiries from this segment. State-owned Indian Overseas Bank, for instance, has seen its MSME portfolio grow by 16.7% year-on-year, reaching Rs 48,000 crore by September 30, 2025, and expects to surpass its Rs 51,000 crore target. State Bank of India has introduced digital MSME loans, enabling end-to-end sanctions in just 45 minutes, and has processed nearly 2.3 lakh accounts with credit limits of Rs 74,434 crore. Indian Bank noted a threefold increase in YoY MSME loan growth to around 17%, driven by demand from the services sector like hospitality. Punjab National Bank has launched various financing products, including digital loans up to Rs 25 lakh and schemes backed by CGTMSE guarantees.

Impact: This surge in MSME lending is crucial for economic growth, fostering job creation, increasing industrial output, and boosting consumption. For banks, it means higher interest income and a strengthened MSME portfolio, contributing positively to their financial performance and meeting strategic growth objectives. Impact Rating: 8/10

Difficult Terms: MSMEs: Stands for Micro, Small, and Medium Enterprises. These are small to medium-sized businesses that play a vital role in job creation and economic development. GST: Goods and Services Tax. An indirect tax levied on the supply of goods and services in India. YoY: Year-over-Year. A comparison of financial or business data from one year to the next. CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises. A scheme that provides credit guarantees to lenders, reducing their risk when lending to MSMEs. Expected Credit Loss (ECL): An accounting standard that requires financial institutions to estimate and account for potential loan losses over the lifetime of a loan, rather than waiting for a default to occur.