The Small Industries Development Bank of India (SIDBI), a premier financial institution for the promotion, financing and development of the Micro, Small and Medium Enterprise (MSME) sector, in joint venture with TransUnion CIBIL, a Credit Information Company, has released the second edition of MSME Pulse, a quarterly report on MSME sector.
The report provides the policy makers, regulators and industry with precise data-driven insights to support policy as well as business decisions. The first edition of the report was released in March 2018.
• The findings of the report showed that the overall commercial credit exposure (Y-o-Y) has shown the highest growth rate in the last five quarters.
• The report further stated that the total on-balance sheet commercial lending exposure in India stood at Rs.54.2 lakh crores, as of March 2018 with Micro and SME segment constituting Rs.12.6 lakh crores, which contributes to ~23% of commercial credit outstanding.
• Further, the report stated that while the growth in NPA rate has moderated, it was too early to conclude that the NPA problem was close to bottoming out.
• The data further showed that the MSME segment has left behind the short-term impact of GST and demonetisation and they were firmly back on growth path with the segment having exposure below Rs 25 crore growing at 15 per cent.
• High growth in New-to-credit (NTC) showed the positive impact of GST. The new-to-credit borrowers are expected to be more than 5 lakh from April 2018 to September 2018, which is 21 per cent higher than NTC observed from October 2017 to March 2018.
Overall, the second edition of the report revealed a broad-based recovery in commercial credit growth and it also showed that the MSME segment continues with strong growth and stable asset quality.
MSME Pulse second quarter edition Highlights
1. Broad-based recovery in credit growth: Overall credit exposure showed the highest growth rate in the last five quarters. In addition, after the lows of September 2017, even the large (greater than ₹ 100 Crores exposure) segment showed two consecutive quarters of recovery in credit growth.
2. Large segment asset deterioration continues, Mid segment NPA rate restricted: In the large corporate segment, NPA rates increased from 15.3 per cent in March 2017 to 18 per cent in March 2018.
On the other hand, NPA rate of mid-segment reduced from 16.3 per cent in March 2017 to 15.9 per cent in March 2018. The directional reduction may be attributed to the bad debt being sold to Asset Reconstruction Companies (ARC) and uptick in loan growth in this segment.
3. Relatively stable asset quality for MSMEs: The MSME NPA rates have remained stable and range bound. In the Micro segment the NPA rate has moved from 8.9 per cent in March 2017 to 8.8 per cent in March 2018. In the SME segment the NPA rate hovered between 11.4 per cent in March 2017 to 11.2 per cent in March 2018. Recognized NPA exposure for MSME is ₹ 81,000 Crores as on Mar’18
4. Growth to ensure asset quality: Future NPA in the segment may be driven by ₹ 11000 Crores exposure, which is currently tagged as ‘standard’ but belongs to entities that have at least one or more exposures tagged as NPA by other bank or credit institution.
5. New private banks most successful in tapping MSME opportunity: Private Banks and NBFCs have further increased their market share in Micro and SME lending from 27.5 per cent and 9.1 per cent in March 2017 to 30.3 per cent and 10.9 per cent in March 2018.
6. Formalization may add a million a year New-to-Credit MSME borrowers: Number of new-to-credit (NTC) borrowers in MSME segment continued to accelerate with 5 lakh NTCs estimated in H1-18 compared to 4 lakhs in H2-17.
7. Demonetization and GST impact are firmly behind the MSMEs: As of March 2018 based on the credit utilization exposure, the metrics used to gauge the impact in this study, it appears that most MSME’s including the smallest ones have recovered from the impact of demonetization and GST.
8. Risk profile study of top 30 locations: A study of the risk profile of top 30 locations by CMR distribution of borrowers’ shows that locations in North and West regions have a comparatively better risk profile than the locations in South and East.