A Study of Long Term Trend in Behavior of Lending to Micro and Small Enterprises with Reference to Nationalized Banks in India

Banking plays a silent, yet crucial part in our day-to-day lives. The economic development of any country depends on real as well as monetary factors. In this globally competitive world we cannot under-estimate the importance of banking and the monetary mechanism. Banking machinery of a country is geared to the economic development of the country. Banking business has done wonders for the world economy. But on the flip side; financial inclusion has continued to remain one of the biggest challenges for the banking sector across world. Especially in India traditional banking model has failed to penetrate the low-income and self-employed segment. The present study examines the penetration (financial inclusion) and long term behavior of lending to Micro and Small Scale Enterprise by Nationalized banks in India. The annual data on credit to micro and small scale enterprises by all nationalized banks period from 1st April 2005 to 31st March 2015 (total span of 10 years) has been considered. The study finds that the total credit extended to micro and small scale enterprises has been increasing; however, the rate of change is highly variable. The present research suggests channelizing more credits for micro and small enterprise, as it is potential growth drivers for Indian economy