Banks’ gross NPAs in MSME loans: The gross non-performing assets (GNPAs) in MSME loans by scheduled commercial banks (SCBs) have dropped by 14.3 per cent to Rs 1.31 lakh crore for the financial year 2022-23 from Rs 1.54 lakh crore during FY22, according to the data shared by Bhanu Pratap Singh Verma, Minister of State in the MSME Ministry in a written reply to a question in the Rajya Sabha.
GNPAs during FY23 were the lowest in the past five years, peaking at Rs 1.83 lakh crore in FY20 from Rs 1.63 lakh crore in FY19 and declining to Rs 1.82 lakh crore in FY21 before shrinking to Rs 1.31 lakh crore in the previous fiscal.
Meanwhile, the MSME GNPA ratio in SCBs had dropped to 6.1 per cent as of December 12 in FY23, according to the data from the Reserve Bank of India (RBI) shared by the minister of state in the finance ministry Bhagwat Karad in a written reply to a question in the Rajya Sabha in December. SCBs’ GNPA ratio in MSME loans in FY22 stood at 7.6 per cent, 7.3 per cent in FY21 and 8.9 per cent in FY20.
Also read: Banks’ gross NPAs in MSME loans drop to 6.1%: Govt data
Among MSMEs, banks’ GNPAs in priority sector credit to micro and small enterprises (MSEs) in the MSME sector had amounted to Rs 1.17 lakh crore in FY22 in comparison to Rs 1.28 lakh crore in FY21, as per a report by the Reserve Bank of India’s (RBI) on Trend and Progress of Banking in India for FY22.
Notably, under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), one-sixth (one in every six loans) or 16.9 per cent of total loan accounts had turned NPAs as of September 2022, according to the RBI’s December 2022 Financial Stability Report.
Gross NPAs reflect the total value of gross non-performing assets for the lender while net NPAs refer to subtracting provisions made by the lender in that period from GNPAs. A declining GNPA ratio means the lender’s asset quality is improving while provisions are a part of the lender’s profit or income that it sets aside for loans that may turn into losses ahead.
Also read: Loans to SMEs pose risk to banks’ asset quality: Report
While GNPAs continue to decline, ratings agency Moody’s Investor Services earlier this year had noted that loans to SMEs continue to pose risks to the asset quality of the banking system as the segment is most vulnerable to rises in interest rates, FE had reported. However, the credit growth will be supported by the underlying growth potential in the economy. The credit demand will be supported from corporate sector and continue to stay strong as higher inflation will drive working capital requirements, it noted.