new delhi, Nov. 25 -- Bank lending to first-time micro-entrepreneurs has plummeted, signalling tighter credit conditions for small businesses already struggling with cash flow pressures and trade turmoil. In the first six months of the fiscal year, a key central scheme to support such lending managed to sanction just about 12% of what was sanctioned in the entire previous fiscal, official data showed. The Prime Minister's Employment Generation Programme (PMEGP), now in its 17th year, provides loan subsidies to traditional artisans and unemployed youth to float small non-farm ventures. The Centre covers up to 35% of the project cost, with the rest financed by banks. This year, the scheme sanctioned just Rs.1,455 crore till 7 October against Rs.12,316 crore in all of FY25, data from the micro, small and medium enterprises ministry showed. In FY25, 108,923 projects were financed with loans of Rs.12,316 crore, while 165,725 projects were financed with loans of Rs.17,759 crore in FY24. While sanctioning tends to rise in the second half of the fiscal year, industry stakeholders termed this year's decline as "surprisingly low". "A combination of factors could have led to a dip in bank loan sanctions this fiscal, such as a shortage of margin money provided by the government, which leads to clearances in loans. Another factor is that higher non-performing assets could have dissuaded banks," Anil Bhardwaj, secretary general of the Federation of Indian SMEs, said. While the scheme supported 100,000 projects in each of the last four years, it has aided only 12,707 of them this year. The exact year-ago data is not available, but the closest comparable number for FY25 was available till November 13. By that date, loans worth Rs.7,517 crore had been sanctioned for 66,918 projects. Queries emailed to the MSME ministry remained unanswered. A mix of rising loan defaults, tighter underwriting norms, and the stiff US tariffs on most Indian exports, is prompting banks to become more cautious, industry experts said. On 18 November, Mint reported that NBFCs had reduced MSME lending due to rising bad loans. A 6 October report by Crisil Ratings said NPAs were rising in MSMEs, particularly in the export-oriented sectors. "This is primarily due to the recent, steep hike in tariffs announced by the US, which affects export-oriented MSME sub-segments such as textiles, garments and carpets, gems and jewellery, shrimp and processed seafoods and certain segments of the chemicals sector," said Subha Sri Narayanan, director at Crisil Ratings. As per Ramendra Verma, partner and government segment leader at Grant Thornton Bharat, bad loans at MSMEs are expected to rise "marginally", driven largely by steep US tariffs....