Credit and finance for MSMEs: Non-performing assets (NPAs) — loans overdue for 90 days and above — in the MSME sector across public and private banks and non-banking financial companies (NBFCs) for the second quarter ending September 30 of the current fiscal dropped to 12.5 per cent from 13.9 per cent during the second quarter of FY22 and 13 per cent during the first quarter of FY23. The total MSME credit exposure as of Q2 FY23 stood at Rs 25.4 lakh crore, growing from Rs 22.9 lakh crore during the year-ago period and Rs 24.5 lakh crore during Q1 FY23, according to the data shared in the latest edition of SIDBI-TransUnion Cibil MSME Pulse Report on Thursday.
However, around 10 per cent portion of the MSME credit exposure has been from legacy accounts with loans overdue beyond 720 days or reported as loss or doubtful accounts “that continue to show MSME as a high-risk business. Thus, these are legacy default cases which do not truly reflect the current outstanding value for the MSME segment,” the report said.
Also read: NPAs in MSME sector increased by 12.5% in Q4 FY22 from year-ago period: Report
Out of Rs 25.4 lakh crore of loan book as of Q2 FY23, Rs 1.3 Lakh crore was against 720 days past due or doubtful accounts and Rs 1.2 lakh crore against loss accounts. Considering the portfolio with exclusions of legacy or loss/doubtful accounts, the NPA rate in the MSME sector was 3 per cent for Q2 with credit exposure of Rs 22.9 lakh crore vis-a-vis 4.4 per cent during Q2 FY22 and 3.2 per cent during Q1 FY23, the report noted.
Among lenders, the highest NPA rate was of NBFCs at 4.5 per cent followed by public sector banks at 3.9 per cent and private banks at 1.5 per cent during Q2 FY23. Segment-wise, micro enterprise loans had an NPA rate of 4 per cent followed by 2.6 per cent in both small and medium enterprise segments.
Small enterprises had the highest proportion in the MSME credit book at Rs 9.5 lakh crore, while micro and medium enterprises held Rs 5.8 lakh crore and Rs 7.6 lakh crore, respectively as of Q2 FY23.
Also read: Banks’ GNPAs in MSME loans decline to Rs 1.54 lakh crore: MSME ministry
“Demand for credit from the MSME sector is at an all-time high and supply by the credit industry remains stable while delinquencies have declined. These findings prove that the credit industry has been able to wield the power of insights and data analytics to identify deserving MSMEs and drive access to credit opportunities astutely across business sectors and geographies,” said Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL.
Meanwhile, disbursements in the MSME sector grew by 24 per cent during Q2 from the year-ago period with the micro segment disbursements growing by 54 per cent, 23 per cent in small enterprises and 9 per cent in medium enterprises. The top ten states based on current outstanding MSME lending balances are Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Karnataka, Rajasthan, West Bengal, Telangana and Haryana.
“The progressive reforms introduced by the government for MSME sector resurgence have borne fruit as reflected in the vigorous business activity and improved credit uptake by enterprises across all the segments,” said Sivasubramanian Ramann, Chairman and Managing Director, SIDBI.