Non-performing asset (NPA) levels in the MSME sector are expected to increase over the next six months, according to the latest FICCI-IBA Bankers’ Survey. The H1 2024 survey round — comprising 22 banks including public sector, private sector and foreign banks representing about 67 per cent of the banking industry – said 38 per cent of respondents expect the MSME NPAs to jump over the coming six months.
Agriculture and textiles are the other top two segments wherein 50 per cent and 45 per cent of respondents respectively see a likely increase in their NPA levels in the coming six months. Gems & jewellery and food processing are other sectors in the top five bracket with 30 per cent and 25 per cent of respondents respectively expecting an NPA jump.
The percentage of respondents expecting an increase in MSME NPAs remained the same from the H2 2023 survey at 38 per cent.
Importantly, the FICCI-IBA report on banks’ role in India’s aim to become a $30 trillion economy by 2047 released last week noted that despite the increasing formalization of MSMEs and data footprint, banks are unable to sustain lending relationships profitably.
The report underscored the opportunity for lenders to completely reimagine MSME lending by using data including bank statements, tax, payment gateway data, etc.
Meanwhile, the gross NPAs in MSME loans by scheduled commercial banks had dropped by 14.3 per cent to Rs 1.31 lakh crore for FY23 from Rs 1.54 lakh crore during FY22, FE Aspire had reported.
FY23 GNPAs 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.
In FY24, banks wrote off Rs 20,261 crore in bad loans linked to micro and small enterprises vis-a-vis Rs 28,392 crore written off in FY23.