Credit and finance for MSMEs: Gross non-performing assets (GNPAs) of the MSME sector with scheduled commercial banks during the last five years have dropped, indicating improvement in the asset quality, showed government data. GNPAs declined by 5.1 per cent from Rs 1.63 lakh crore during the financial year 2017-18 to Rs 1.54 lakh crore during FY22 after increasing to Rs 1.82 lakh crore amid the Covid pandemic during FY21, the data shared by the minister of state for MSMEs Bhanu Pratap Singh Verma in the Lok Sabha on Thursday noted. GNPAs in the MSME sector for FY19 and FY20 stood at Rs 1.61 lakh crore and Rs 1.62 lakh crore respectively.
Also read: Nearly 17% of ECLGS loans have turned into NPAs: RBI report
Within the MSME sector, banks’ GNPAs in priority sector credit to micro and small enterprises (MSEs) stood at Rs 1.17 lakh crore in FY22 vis-a-vis Rs 1.28 lakh crore GNPAs in FY21, according to the data from the recent Reserve Bank of India’s (RBI) Report on Trend and Progress of Banking in India for FY22, FE Aspire had reported. 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.
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: 18 per cent of the loans taken by MSMEs in Mumbai turn into non-performing assets: SLBC report
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, the report noted.
Meanwhile, under the Emergency Credit Line Guarantee Scheme (ECLGS), one-sixth (one in every six loans) or 16.9 per cent of total loan accounts had turned NPAs as of September 2022, the RBI noted its December 2022 Financial Stability Report. “The September 2022 position of the ECLGS lending indicates that distress continues in the MSME sector,” the report said.
Importantly, in order to check the probability of an MSME turning NPA, credit bureau TransUnion CIBIL in December 2022 had launched a ranking model in collaboration with digital credit marketplace Online PSB Loans. The system leverages business information including GST, bank statements, income tax returns and apply machine learning to predict the probability of an MSME becoming NPA in the next 12 months. Based on the financial, income, and trade data of an MSME, the system ranks it on a scale of 1 to 10.
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