MUMBAI: Contrary to the popular perception, credit growth in the MSME sector improved despite spoilers like demonetisation and GST, according to a Cibil-SIDBI joint report.
In fact, the overall credit exposure registered the highest growth in the last five quarters at Rs 54 lakh crore as on March, 2018. Of this, MSMEs exposure constitutes 23 per cent or Rs 12.6 lakh crore, the MSME Pulse Quarterly Report noted.
Interestingly, microcredit of less than Rs 10 million and SMEs of Rs 10-250 million grew by 22 per cent and 13 per cent, respectively, as on March, 2018, implying that the self-inflicted pain due to GST and demonetisation is over.
“They (MSMEs) are firmly back on a growth path with the segment having exposure below Rs 250 million growing at 25 per cent. High growth in new credit shows the positive impact of GST,” noted Mohammad Mustafa, CMD, SIDBI. Bad loans moderated in the sector but it was too early to conclude that it’s bottoming out.
Also, fresh NPAs may be driven by Rs 11,000 crore standard credit exposure, belonging to companies who have at least one or more credit exposures as NPA by other bank or credit institution, it added.
As such, there’s a system-wide exposure of Rs 1.2 lakh crore of those entities with CIBIL MSME Rank (CMR) of 7 to 10 -- associated with high risk.
“These high-risk exposures are expected to add Rs 16,000 crore in NPAs by March 2019. However, strong credit demand in this segment among other things driven by the formalisation of MSME segment is likely to keep the overall NPA rate in this segment in check,” the report said.
As per report, new private banks are increasingly tapping the MSME opportunity with their share of lending touching 30.3 per cent as on March, 2018, while that of NBFCs grew marginally to 10.9 per cent from 9.1 per cent earlier. In other words, the share of public sector banks fell from 57 per cent to 50.4 per cent.
Meanwhile, Mustafa noted that RBI’s latest move allowing banks to recognise NPAs in 180 days as against the previous norm of 90 days past due date for MSMEs is expected to bring relief worth Rs 15,000 crore of exposure.