Credit and Finance for MSMEs: MSME loans worth Rs 2.32 lakh crore are at a higher risk of becoming non-performing assets (NPA) as they fall in the highest risk category of 7 to 10, according to credit information firm TransUnion Cibil. The risk bracket is based on TransUnion Cibil’s solution Cibil MSME Rank (CMR) that assigns a ranking to MSMEs on a scale of 1 to 10 based on their credit history. A higher ranking suggests a greater risk of small business loans going bad in the coming 12 months. Out of Rs 2.32 lakh crore loans at risk, micro-enterprises having loans of less than Rs 10 lakh, in the highest risk category of CMR-7 to CMR-10, totals up to Rs 13,600 crore.
“The ongoing COVID-19 pandemic poses new challenges to businesses, especially for micro-enterprises, who are often more vulnerable to sudden changes in the economic environment,” said Rajesh Kumar, MD and CEO, TransUnion Cibil in a statement. The NPA rate for MSMEs has increased continuously over the past few years. It stood at 12.6 per cent as of December 2019, the credit bureau said.
Lending to MSMEs, having aggregate credit exposure of up to Rs 50 crores, was around Rs 17.94 lakh crores. This represented approximately 28 per cent of commercial credit outstanding while the overall on-balance sheet credit exposure was Rs 64.04 lakh crores in India, Transunion Cibil said. The micro-segment comprises 55 lakh businesses had Rs 93 thousand crores in loan balances. According to the credit bureau, around 90 lakh MSMEs are eligible for CMR ranking.
Importantly, to provide relief to the borrowers during the Coronavirus lockdown, the Reserve Bank of India had allowed the 90-day moratorium period to be excluded from the NPA classification since as per the RBI rules, payments overdue beyond 90-day period are treated as NPAs. The central bank had announced a moratorium on term-loan instalments due between March 1 and May 31.