Credit and Finance for MSMEs: India’s scheduled commercial banks have reported gross non-performing assets (GNPA) worth Rs 1.17 lakh crore in the priority sector credit to micro and small enterprises (MSEs) for the financial year 2021-22 in comparison to Rs 1.28 lakh crore worth GNPAs in their MSE loan portfolio recorded in FY21, according to the data from the Reserve Bank of India (RBI). The share of MSE GNPAs out of total NPAs for banks was 16.87 per cent in FY22 and 16.47 per cent in FY21.
The data shared in the RBI’s Report on Trend and Progress of Banking in India for FY22 on Tuesday noted that among all banks, small finance banks (SFBs) had the highest share of MSE GNPAs in their total NPAs followed by public sector banks, private banks, and foreign banks. While SFBs reported a 28.98 per cent share of MSE GNPAs in their overall NPA value, public banks’ MSE GNPAs had a share of 18.96 per cent. On the other hand, foreign banks reported an 11.88 per cent share while private banks saw a 10.52 per cent share of MSE GNPAs in their total NPAs.
Also read: 65% of banks expect MSME NPAs to increase in second half of 2022: FICCI-IBA survey
However, in terms of the value or the amount, public banks’ MSE GNPAs amounted to Rs 96,231 crore, higher than Rs 17,799 crore for private banks, Rs 2,024 crore for SFBs, and Rs 1,638 crore for foreign banks. Overall, banks’ GNPAs in loans to all priority sectors including agriculture and others in FY22 stood at Rs 3 lakh crore with a share of 43.09 per cent in their total NPAs. While the amount was down from Rs 3.15 lakh crore in FY21, the GNPAs share in FY22 had increased from 40.40 per cent in FY21.
Importantly, the RBI in its Financial Stability Report (FSR) in June this year had noted that while the GNPA ratio of banks in the overall MSME sector moderated 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.
Also read: Now banks can check the probability of an MSME turning NPA. Here’s how
To ascertain the NPA risk among MSME borrowers, credit bureau TransUnion CIBIL had recently launched a ranking model for MSMEs that leverages business information including GST, bank statements, income tax returns and apply machine learning to it. The model gives the probability of an MSME becoming a non-performing asset (NPA) in the next 12 months.