NPA ratio in the large and medium enterprises segments was also significantly higher at 18.1% and 17.1%, respectively
Stress in the micro, small and medium enterprises (MSMEs) segment remained high in the March quarter. The gross non-performing asset (NPA) ratio of the small and medium enterprises (SMEs) segment was at 10.8% for the quarter ended March 2019, according to the July 2019 edition of the MSME Pulse report by Transunion Cibil and Small Industries Development Bank of India (Sidbi). It changed little from the bad loan ratio in the quarter ended December 2018.
The delinquency ratio may not be capturing the full extent of stress in the system because banks have retained as standard roughly Rs 15,000 crore worth of stressed micro, small and medium enterprises (MSMEs) loans under two sets of regulatory dispensation. The NPA ratio, however, was significantly higher in the large and medium enterprises segments at 18.1% and 17.1%, respectively. The gross NPA ratio for the commercial segment as a whole eased to 16% in March 2019 from 17.2% in March 2018.
The report classifies commercial loans into four segments on the basis of credit exposure aggregated at the entity level. The micro category consists of companies with a credit exposure of less than Rs 1 crore, companies in the SME category have loan exposures between `1 crore and Rs 25 crore, mid-sized companies have loans worth between Rs 25 crore and Rs 100 crore, while large borrowers are those with a credit exposure of over Rs 100 crore.
As of March 2019, the total on-balance sheet commercial lending exposure in India stood at Rs 64.1 lakh crore, with the micro and SME segments constituting Rs 15.9 lakh crore, or nearly 25% of all commercial credit outstanding. Large corporates accounted for Rs 42.3 lakh crore, or 66% of all outstanding commercial loans.
Micro loans grew 19.8% year-on-year (y-o-y) in the quarter ended March 2019, while SME loans recorded a 15.6% growth y-o-y. Growth in the mid-sized segment was much slower at 5.5%. Lending to large enterprises grew 11.8% over the March 2018 to March 2019 period.
Earlier this month, FE had reported that a big chunk of loans to MSMEs worth some Rs 15,000 crore could slip over the next 10 months. In fact, the bigger chunk could slip sooner since companies have just 30 days to repay their dues.
These loans would have turned NPAs a long time ago had the Reserve Bank of India (RBI) not given banks a breather. A June 6, 2018, notification had allowed banks and NBFCs to temporarily classify their exposure to all MSMEs, including those not registered under the goods and services tax (GST), as a standard asset as long as it was smaller than Rs 25 crore and standard as on August 31, 2017. MSME loans worth Rs 7,995 crore had been retained by banks as standard under this central bank notification.
Again, a January 1 circular of RBI had permitted banks to do a one-time restructuring of existing loans to MSMEs and classify them as ‘standard’ without a downgrade in the asset classification. Consequently, public-sector banks (PSBs) had restructured 1.53 lakh accounts with an outstanding of Rs 5,194 crore. The data had been compiled by FE from the Q4FY19 notes to accounts of 18 PSBs. The amount could be closer to Rs 15,000 crore since the results of Dena Bank and Vijaya Bank, which have been merged with Bank of Baroda, have not been declared.