MSME Pulse

The need of MSME PULSE

Information is key to decision making and if it is available at the right time, meaningful interventions can be made. 
Since structured data in respect of MSME is not available during the year, no early signs are available to help taking decisions to those who matter and make policies, be it bankers or policy makers. A comprehensive document based on close monitoring and tracking of MSME segment providing insights to policy makers, therefore, becomes imperative.
Till date, no such report based on a on a study done on over 5 Million active MSMEs having access to formal credit, with live credit facilities in the Indian banking system, is available.   
While there is some data available with respect to Banks, there is no data in respect to NBFCs.  Further, such data does not tell as to how many new entrepreneurs have accessed credit and what is the situation across different states. The launch of MSME Pulse, a quarterly comprehensive report, is an attempt to fill this gap and aims to provide the credit industry with trends and insights for making information oriented business decisions.

Key Findings of MSME PULSE 2nd edition (April - June 2018)

  • Broad based recovery in credit growth: Overall credit exposure (Y-O-Y) has shown the highest growth rate in the last five quarters. In addition, after the lows of Sep’17, even exposure of the Large (credit exposure greater than ₹ 100 Crores) segment has grown two consecutive quarters showing early signs of recovery in credit growth. Micro (credit exposure less than ₹1 Crore) and SME (credit exposure in the range of ₹1 Crore - 25 Crores) segments constitute ₹12.6 Lakh Crores credit exposure (23% of commercial credit outstanding) with Y-O-Y growth of 22.2% and 12.8% respectively. In comparison, between Mar'17 and Mar'18, MID (credit exposure in the range of ₹25 Crores - 100 Crores) segment exposure has grown by 7.2% and Large (credit exposure greater than ₹100 Crores exposure) segment by 5.9%

  • Large segment asset deterioration continues, Mid segment NPA rate restricted: In the Large corporate segment, NPA rates increased from 15.3% (Mar’17) to 18.0% (Mar’18). The directional reduction in NPA rate of Mid segment (16.3% in Mar’17 to 15.9% in Mar’18) may be attributed to bad debt being sold to Asset Reconstruction Companies (ARC) and uptick in loan growth in this segment. Assets under the management of ARCs’ increased by commensurate amount during the period.

  • Relatively stable asset quality for MSMEs: MSME NPA rates have remained stable and range bound. In the Micro segment the NPA rate has moved from 8.9% (Mar’17) to 8.8% (Mar’18). In SME segment the NPA rate hovered between 11.4% (Mar’17) and 11.2% (Mar’18). Recognized NPA exposure for MSME is ₹81,000 Crores as on Mar’18.

  • Growth to ensure asset quality: The future NPA in the segment may be driven by ₹11,000 Crores exposure, which are currently tagged as ‘standard’ but belongs to entities at least one or more exposures of which are tagged as NPA by other banks or credit institutions. Additionally, as of 31st Mar’18, there is a system-wide exposure of ₹120,000 Crores belonging to entities with CIBIL MSME Rank (CMR) between CMR-7 and CMR-10. CMR-7 to CMR-10 are associated with High Risk. These high-risk exposures are expected to add ₹16,000 Crores in NPA by Mar’19. However, strong credit demand in this segment, among other things driven by formalization of credit demand is likely to keep the overall NPA rate in this segment in check. In addition, RBI relief to MSME borrowers with aggregate exposure up to ₹25 Crores, giving 90 day extension for repayments, is likely to lead to a reversal of about ₹15,000 Crores Gross NPA in this segment.

  • New Private Banks most successful in tapping MSME opportunity: Private Banks and NBFCs have further increased their market share in Micro and SME lending from 27.5% and 9.1% in Mar’17 to 30.3% and 10.9% respectively in Mar’18. Share of Public Sector Bank (PSB) has fallen from 57% to 50.4% in the same period. Despite higher growth rate New Private Banks have better quality of acquisition of New to Bank (NTB) borrowers with 46% of them belong to high quality CMR-1 to CMR-3. In comparison, other lenders have around 35% of their incremental borrowers in CMR-1 to CMR-3.