While loan growth is healthy and NPLs are stable, private banks have been gaining market share at cost of PSBs
The recent MSME study by TransUnion CIBIL shows the following trends: (i) loan growth healthy at 21% y-o-y and stable NPL trends in Q3FY19, (ii) private banks and NBFCs continue to gain market share at the expense of PSU banks, (iii) new-to-credit (NTC) lending accelerated in FY2018 led by private banks and (iv) PSBs continue to have a major share in onboarding NTC borrowers in the < Rs 1 mn segment while private banks are gaining share in the Rs 1-100 mn segment.
MSME loans: 23% of overall loans and growing at >20%
MSME accounts for 23% of loans in India as of Q3FY19. Overall growth trends have been quite solid at 20-25% in recent quarters with Q3FY19 reporting 21% y-o-y growth. Growth is skewed towards MSME lending to individuals at 25% y-o-y (loan mix up 175 bps y-o-y to 41% of overall MSME book). Micro segment was also strong (loans in <`10 mn segment grew 19% y-o-y in Q3FY19, mix up 20bps y-o-y to 18% of overall MSME loans).
Private banks’ and NBFCs’ share in MSME lending continues to increase
Majority of the y-o-y growth in MSME lending in Q3FY19 has come from private banks and NBFCs with market shares increasing by 400 bps and 300 bps, respectively, at the expense of PSU banks. PSU banks are still the majority provider of credit to MSMEs (40% share), but this has consistently reduced in the last five years (from 58% in Q3FY14). However, going forward, we expect this trend to moderate as more PSU banks come out of the PCA framework and the impact of liquidity issues shows up in the numbers for NBFCs.
New MSME credit seekers have accelerated in FY2018
An analysis of NTC borrowers in the MSME segment of <Rs 100 mn ticket size shows robust growth of 20% y-o-y to 0.5 mn in 2HFY18 from 0.4 mn in 2HFY17. This has been driven by faster growth in the Rs 10 mn-100 mn segment (24% y-o-y in 2HFY18) with private banks gaining market share at the cost of PSU banks. Private banks have been less aggressive in the <Rs 1 mn segment.
Asset quality trends stable overall
Unlike the last few reports which had greater disclosures on NPLs, the current report discussed only one aspect which compared the NPLs in the corporate segment with the micro, SME and mid-corporate portfolio. On that basis, the NPLs in the corporate portfolio is the highest at 19% of loans, the mid-corporate segment was at 17% of loans, SME and micro loans have been stable for the past few years at 11% and 9% respectively. We don’t have the break-up of NPLs across players and the NPLs in various average ticket sizes. On the basis of the data available, one could conclude that the trends may not have changed.