Credit and finance for MSMEs: Unsecured loans, which comprise business loans to small and medium enterprises (SMEs) and consumer loans, is likely to be the only segment in the non-banking financial companies’ (NBFC) total assets under management (AUM) to see pre-Covid era growth of 20-22 per cent this financial year, analytics company Crisil said on Monday. This would come on the back of the double-digit AUM growth of 11-12 per cent to around Rs 13 lakh crore for NBFCs in FY22, riding on macroeconomic tailwinds, after three years of single-digit growth.

“With NBFCs focussing on higher-yield segments, unsecured loans, which have the second-largest share (16-20 per cent) in the NBFC AUM pie, may be the only segment to touch the pre-Covid era growth of 20-22 per cent this fiscal. The cautious approach of NBFCs had resulted in a decline in AUM for this segment in fiscal 2021, while fiscal 2022 saw a V-shaped recovery,” said Ajit Velonie, Director, CRISIL Ratings.

While business loans will benefit from macroeconomic tailwinds given the expected growth of 7.3 per cent in the gross domestic product (GDP) this fiscal, consumer loans will benefit by rising retail spend across consumer durables, travel, and other personal consumption activities, the credit rating agency noted.

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Moreover, loans against property, another product suite of NBFCs catering to SMEs, is also likely to see 10-12 per cent growth, though competition will keep higher growth at a distance in this space, Crisil said. Also, gold loans are expected to register a steady growth rate of 10-12 per cent on the back of demand from micro enterprises and individuals for their working capital and personal requirements respectively.

Overall, credit to MSMEs during FY22 had increased by 13.38 per cent to Rs 20.22 lakh crore from Rs 17.83 lakh crore in FY21 even as the number of MSME loan accounts dipped from 420 in FY21 to 265 in FY22, according to the provisional data in the Reserve Bank of India’s FY22 annual report. In the current financial year, as of July 2022, credit to the MSME sector was Rs 18.08 lakh crore, up 24 per cent from Rs 14.56 lakh crore in July last year, according to the RBI’s latest data on sectoral deployment of bank credit.

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