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 maker 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.

MSME Pulse - February 2024 – Highlights

Credit flow to MSMEs continues to grow catalysed by technology and data-analytics oriented lending. This credit growth is broad-based, marked expansion is seen amongst semi-urban and rural MSMEs, as per the findings of the latest edition of MSME Pulse Report based on data as of quarter ending Sep 2023:

• Credit flow to MSMEs continues to grow catalysed by technology and data-analytics oriented lending. This credit growth is broad-based, marked expansion is seen amongst semi-urban and rural MSMEs, as per the findings of the latest edition of MSME Pulse Report based on data as of quarter ending Sep 2023:
• Commercial credit growth momentum continues: Commercial credit portfolio grew at 11% year-over-year (YOY) and credit exposure stood at INR 28.2 Lakh Crores at end of period Sep 2023.
• 29% growth in demand for commercial loans: Increased economic activity has spurred the demand for commercial loans which grew 29% in the Jul-Sep 2023 quarter as compared to the same period in 2022. MSME credit demand at NBFCs (14% share of credit demand) grew fastest at 39% during this quarter.
• 20% growth in credit supply: Credit supply to MSMEs grew by 20% YoY by volumes in quarter Jul-Sep 2023 indicating improved lender confidence. Commercial credit lending still continues to maintain its overall growth post initial boost provided by ECLGS Scheme(launched by Government of India to support credit to MSME sector). Availability of enriched and timely credit data and rapid implementation of digital lending infrastructure has contributed significantly towards enhancing lender confidence. 7% YoY growth is seen in borrowers who availed sub-INR 1 Crore loans (Micro segment) while growth of borrowers seeking greater than INR 10 Crores (Medium) has decreased by value.
• Robust portfolio growth supported by improved performance: During quarter Jul-Sep 2023, overall balance-level delinquencies measured as 90 days-past-due to 720 days-past-due and those reported as “Sub-standard”, have improved, and stands at 2.3%. This is the lowest delinquency rate in the last 2 years.
• Manufacturing sector accounts for highest credit originations: As per the latest information released by the Ministry of Statistics and Programme Implementation in December 2023, output in MSME manufacturing accounted for 40.83% of output in all India manufacturing during the year 2021-22. This is also reflected in TransUnion CIBIL Commercial bureau data where the Manufacturing sector accounts for 37% of value originated and has the largest share, followed by the Trades sector with a 28% share. Professional Services and Other Sectors together account for the remaining 35% share (of the data considered for this report).
• Textiles is the highest contributing sub-sector within Manufacturing sector originations: The majority of originations within sub-sectors are led by the Medium segment (10 Crores to 50 Crores) and catered for by private banks. The geographical distribution of originations across sub-sectors is concentrated in three top-contributing states: Gujarat, Tamil Nadu, and Maharashtra. While the manufacturing sector accounts for 37% of origination value it has only 25% share of the volumes originated. However, the Manufacturing sector experienced an increased share in originations by value within the Micro segment (less than one Crore) compared to the previous year. The Trade sector accounts for the highest share of origination volumes with 39% of loans originated; 41% of these disbursements are from NTC MSMEs.