MSME NPA ratio rose to 12.8% in June: Cibil

By: |
October 13, 2020 1:50 AM

It also said disbursements to small enterprises picked up pace after the government had announced the Emergency Credit Line Guarantee Scheme (ECLGS), with state-owned banks ramping up disbursements to 2.6 times the levels seen in February.

"Such borrowers, instead of opting for debt recast, may prefer to seek additional working capital financing as announced by the RBI under its COVID-19 regulatory package," it said."Such borrowers, instead of opting for debt recast, may prefer to seek additional working capital financing as announced by the RBI under its COVID-19 regulatory package," it said.

The non-performing assets (NPAs) ratio in the micro, small and medium enterprises (MSME) segment rose to 12.8% in June 2020, from 11.4% in June 2019, TransUnion Cibil said in the October 2020 edition of its MSME Pulse report. It also said disbursements to small enterprises picked up pace after the government had announced the Emergency Credit Line Guarantee Scheme (ECLGS), with state-owned banks ramping up disbursements to 2.6 times the levels seen in February.

Private banks’ MSME NPA ratio increased to 5.8% in June 2020 from 4.6% in June 2019. For public sector banks, the ratio rose to 18.6% in June 2020 from 17.5% in the same month last year. Non-banking financial companies (NBFCs) witnessed the most significant increase in NPA ratio – to 9.7% in June 2020 from 5.8% in June 2019.

“One of the reasons for a sharp increase in NBFCs’ NPA rates is their most pronounced slowdown in MSME credit growth,” the report said, adding that within the MSME sub-segments, NPA ratios are generally higher for sub-segments with larger ticket sizes.

The report said the super-prime segments of CMR-1 to CMR-3 as of February 2020 missed relatively the least number of payments between March 2020 and June 2020. Similar trends have been observed for changing utilisation rates, that is, super-prime segment MSMEs have shown a lower tendency of migrating to higher utilisation rate buckets. These early signs show that structurally strong MSMEs continue to be relatively more resilient in the face of the pandemic, the report said.

MSME credit disbursements in metro locations were most impacted during April and May 2020, and they bounced back in June after the implementation of the ECLGS. Urban, semi-urban and rural regions saw a relatively lower impact during April and May 2020. After ECLGS, all these regions experienced a steep increase in credit disbursals in June, owing to the relaxation in lockdowns.

Delving further into state-wise changes in the MSME credit landscape, the report observed while at an overall national level there was significant growth in MSME credit disbursals driven by the ECLGS, for states like Maharashtra and Delhi, disbursal levels in June 2020 had the lowest rise compared to February 2020. “Credit disbursals in June 2020 for the states of Bihar, Punjab, Kerala and Jharkhand have increased four fold compared to those in February 2020,” the report said.

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