MSME
Pulse Ninth Edition Highlights
MSME credit continues to
have lowest default rate in commercial lending:
The default rates across all MSME segments continue
to be lower than large corporate NPA rates. The NPA rates for the Micro segment
MSMEs have remained stable. Within the Micro loans[1]
segment <10L ticket size loans have observed a reduction in default rates.
However, Small and Medium segment NPA rates continue to increase for last three
quarters consecutively.
Public Sector Banks gain
market share in MSME lending:
Public
Sector Banks (PSBs) had been losing market share continuously over a long
period of time. A surge in both NBFCs and Private Banks market share had been
the reason for the PSB segment losing its share.
However, in the quarter ending
Dec’19, PSBs have gained market share in MSME lending, for the first time in
the past few years. As of Dec’19, PSB market share stood at 49.8% of the
overall MSME lending book, with the highest market share in the Micro segment
at 59.2%.
Micro segment showed fresh
credit disbursals worth ₹92,262 crores in 2019:
Lenders disbursed ₹92,262 croresworth of fresh
credit towards the Micro segment. While Private Banks and public sector banks
have roughly similar share on fresh credit disbursed in the Micro segment, the
growth trends differ significantly when analysed at a granular sub-segment
level.
Maharashtra had highest
share; Rajasthan clocked fastest growth on fresh credit disbursals in the Micro
segment for 2019:
Maharashtra, Tamil
Nadu and Andhra Pradesh cumTelangana grabbed the largest share of fresh
disbursals in the Micro loans segment. While Rajasthan, Delhi and Madhya
Pradesh showed fastest growth in fresh disbursals in the Micro segment.
However, the trends differ when analyzedby lender category – forinstance, the Micro
segment credit landscape in Uttar Pradesh is dominated by Public Sector Banks;
in Tamil Nadu by Private Banks and in Rajasthan by Non-Banking Financial
Companies (NBFCs).
Structurally stronger MSMEs
are likely to be least impacted in the lockdown:
The lockdown impact on any entity will depend on
multiple factors; two of the most critical factors being credit leverage and
the liquidity position of the entity. Deeper insights can be gained on these
two factors at an entity level by studying the CMR and utilization rates of
these entities.
By simulating these two elements on past events like GST
implementation, IL&FS crisis, and rise in NPA rates, we have observed and
concluded that entities with low leverage and higher liquidity had lowest
default rates during and post these events.
While
the impact of the lockdown may be more pronounced
than that of the earlier
events, but the core essence of the
simulation study highlights that
‘structurally stronger MSMEs
will be the least impacted’. The findings of the
study on the
structural position of MSMEs prior to the lockdown,
concludes that
almost two out of three MSMEs are well
placed to weather this lockdown and30%
are very strongly
positioned.
Commercial
credit exposure for Dec’19 stood at ₹64.04 lakh crores with YoY expansion at
3.9%:
The total on-balance sheet commercial lending exposure in
India stands at ₹64.45 lakh crores as of
Jan’20, which was ₹64.04 lakh crores in Dec’19. Of this, the MSME segment represents₹17.75 lakh crores credit exposure as ofJan’20. It is important
to note that the MSME segment has observed a lowering of credit exposure across
most sub-segments of MSME lending in the last few quarters.
The large
corporates segment is at ₹46.7 lakh crores credit
exposure and has observed a YoY expansion of 6.3%.
Utilization
rates of working capital limits for MSMEs have been reducing:
Reducing
utilization levels of working capital limits in MSMEs has been one of the
reasons for lowering of credit exposure for the segment. The drop in
utilization rates for Private Banks has accelerated rapidly while that of PSBs
has been milder.
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