MSME credit growth remains robust but CIBIL warns of possible NPA stack up: Report

The report said the mid and large corporate segment held the biggest share of the overall credit at about 43%, with an exposure of Rs 47.5 lakh crore.

MUMBAI: The outstanding loans of Indian lenders to the micro, small and medium enterprises (MSMEs) expanded two-and-a-half times in five years through 2018, credit information company TransUnion CIBIL said, while also warning about debt build-ups leading to possible stress in the quality of assets.

While the outstanding credit to MSMEs grew to Rs 25.2 lakh crore at the end of 2018 from Rs 10.4 lakh crore in 2013 at a compound growth rate of 19.6%, the consolidated non-performing asset in the sector increased to 9% from 7.3%, CIBIL said in a report, published along with Small Industries Development Bank of India (SIDBI).

“We have observed significant acceleration in lending in the past couple of years, but growth of this magnitude needs to be monitored carefully as rapid acceleration in debt build-up may indicate prospective stress in the system,” TransUnion CIBIL managing director Satish Pillai said in a news release on Thursday. “While lenders should monitor their portfolios constantly for loan stacking, leverage and debt build-up, the regulators must keep systemic risks in check.”

In the reported period, while public sector banks remained the largest lending group to the segment, their loan exposure fell to 39% from 58% as the central bank imposed lending restrictions on several banks that were saddled with bad debt.

CIBIL, in the report, said relaxation on the use of trade credit data from regulated bill discounting platform TReDS for credit scoring could help improve underwriting standards for banks, while also helping MSME businesses and individuals get better-priced loans.

India’s commercial credit growth remained strong at 14.4% year-over-year in the December quarter, taking the overall outstanding credit to Rs 111 lakh crore, driven by loan growth of 14.9% to large companies, the report said. The quality of assets in this segment showed a slight improvement with NPAs falling to 19% in December from 20% in June 2018 when corporate NPAs had peaked in the aftermath of the February 12 Reserve Bank of India circular for restructuring of loans.

The report said the mid and large corporate segment held the biggest share of the overall credit at about 43%, with an exposure of Rs 47.5 lakh crore. This was followed by consumer loans, which include retail, agriculture and priority sector lending, at 35%, or Rs 38.5 lakh crore. The MSME segment was third with about 23% share.

“MSME credit growth acceleration along with a decline in NPAs (in commercial loans since June) is a very promising indicator of the prospective development in the segment and thereby economic growth,” said Mohammed Mustafa, chairman at SIDBI.




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