The total credit outstanding of scheduled commercial banks (SCBs) to the MSME sector as of March 31, 2024, stood at Rs 28.04 lakh crore of which non-performing assets (NPAs) of SCBs to the sector amounted to Rs 1.25 lakh crore, Minister of State in the Finance Ministry Pankaj Chaudhary informed Lok Sabha recently. The gross NPA percentage of SCBs, for the MSME sector was 4.46 per cent as against 2.74 per cent for total loans and advances, Chaudhary said.
The gross NPAs in MSME loans by SCBs had declined by 14 per cent to Rs 1.31 lakh crore in FY23 from Rs 1.54 lakh crore in FY22, FE Aspire had reported earlier. Importantly, FY24 GNPAs were the lowest in the past six 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 FY23 and Rs 1.25 lakh crore in the last fiscal.
However, the bad loans in the MSME sector are likely to increase in the second half of 2024 as banks are unable to sustain lending relationships profitably, the FICCI-IBA Bankers’ Survey (January-June period) had said in September this year.
According to the survey — comprising 22 banks including public sector, private sector and foreign banks representing about 67 per cent of the banking industry – 38 per cent of respondents expected the MSME NPAs to jump over the coming six months. The report underscored the opportunity for lenders to completely reimagine MSME lending by using data including bank statements, tax, payment gateway data, etc.
In May this year, Finance Minister Nirmala Sitharaman had accused the Congress-led UPA government of turning “the banking sector into a cesspool of bad loans, vested interests, corruption and mismanagement” before 2014. The minister said banks were reluctant to provide loans required by small businesses to grow their businesses during the Congress rule.