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

  • Fastest growing exposure in Commercial Lending: Micro (credit exposure less than ₹ 1 Crore) and SME (₹ 1 Crore-25 Crore) segments constitute ₹ 11.7 lakh Crore credit exposure (23% of commercial credit outstanding) with Y-o-Y growth of 20% and 9% respectively as compared to 4% for Mid (₹ 25 Cr-100 Crore) and 0.5% for Large (greater than ₹ 100 Crore exposure) from Dec’16 to Dec’17.
     
  • Relatively stable asset quality: NPA rates have remained range bound between 9.2% (Dec’16) to 8.8% (Dec’17) for Micro and 11.3% (Dec’16) to 11.2% (Dec’17) for SME segment. In comparison, for Large corporate segment, NPA rates increased from 14.7% (in Dec’16) to 16.9% (in Dec’17). As such, MSME sector exhibited high credit growth and relatively lower cyclical deterioration in asset quality.
     
  • First time MSME borrowers, on the rise: Number of MSME entities seeking credit for the first time (New to Credit (NTC) borrowers) increased significantly- from ~2.7 lakhs in the six month period from January -June 2016 to ~4 lakhs in the period from July to December 2017. The NTC MSME usually belongs to the “Very Small” segment (less than ₹ 10 lakhs exposure). Providing access to credit for NTC MSME borrowers is largely enabled by Public Sector Banks which have about 80% contribution specifically in this segment.
  • Private Banks gaining market share: While Public Sector Banks are enabling financial inclusion, the MSME segment is becoming increasingly attractive for the Private Banks & NBFCs from a profitability and PSL (Priority Sector Lending) perspective.  Private Banks and NBFCs have aggressively stepped up acquisition efforts through branch expansion and digitization initiatives offering lower turn-around-times (TATs) and superior service to these borrowers, thereby gaining market share from 34% in Dec’15 to 40% in Dec’17.