Credit and Finance for MSMEs: The ongoing stress in the micro, small and medium enterprises (MSMEs) led 18 per cent of the loans taken by the sector in the country’s financial capital Mumbai turn into non-performing assets (NPAs) as of September 2022, as per The Indian Express report on Tuesday.
According to the data compiled by the State Level Bankers Committee (SLBC) of Maharashtra, 46,978 accounts involving Rs 22,579 crore loan out of total Rs 162,874 crore MSME loans taken in Mumbai (including suburban region), have turned into NPAs.
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The central bank defines NPA as any advance or loan that is overdue for more than 90 days. “A credit facility in respect of which the interest and/ or installment of principal has remained ‘past due’ for a specified period of time,” noted Reserve Bank of India
Out of the total loan amount, NPAs from Mumbai alone amounted to Rs 19,324 crore which is 18 per cent of the total outstanding loan of Rs 1,09,927 crore. In Mumbai Suburban area, Rs 3,255 crore loan or six percent of the Rs 52,947 loan amount disbursed remained outstanding.
The SLBC data revealed that in Maharashtra out of a total MSME loans of Rs 3,14,914 crore, Rs 34,488 crore, or 11 per cent, have become NPAs. Public sector banks accounted for Rs 30,938.6 crore MSME loans and Rs 2,986.9 crore banks.
However, NPAs in the state have fallen from Rs 47,901 crore, or 19 per cent of total loan outstanding as of September 2021.
Further, in Pune, MSME loans of Rs 3,606 crore out of the total outstanding amount of Rs 43,988 crore turned into NPAs.
The demand for MSME loans increased as the government announced lockdown due to the Covid pandemic in March 2020 which led to cash crunch and reduced demand.
Under the MUDRA loan scheme, Rs 4,768 crore loans out of Rs 31,944 crore loan outstanding have turned bad as of September 2022. Of this, public sector banks account for Rs 3,778 crore NPAs, as per the SLBC data.
Importantly, the Reserve Bank of India in its latest Financial Stability Report (FSR) in June this year noted that even as the gross NPA ratio of banks in the MSME sector dipped from 11.3 per cent in September 2021 to 9.3 per cent in March 2022, the bad assets in the sector remain relatively high. According to the report, the Rs 46,186-crore restructured MSME portfolio, which constituted 2.5 per cent of total advances under the May 2021 restructuring scheme, has the potential to create stress in the sector.
The FSR report also noted that the pandemic battered MSME sector is now showing signs of revival with a significant increase in private banks lending during the fourth quarter (Jan- Mar) of the last fiscal year 2021-22.
Domestic demand and pick up in ancillary industries and service units has now grown the funding appetite of the sector, providing employment to a large chunk of the population, the report added.
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Meanwhile, the government’s flagship credit scheme, Emergency Credit Line Guarantee Scheme (ECLGS) has played a key role in reviving the MSME sector. Under the scheme, loans amounting to Rs 3.32 lakh crore were sanctioned till April 30, 2022, of which an amount of Rs 2.54 lakh crore was disbursed (Rs 2.36 lakh crore by banks).