Outstanding MSME loans up 2.5 times in five years; NPAs touch 9 pc

Outstanding loans to MSMEs grew two-and-a-half times in five years till 2018, according to data from credit information company TransUnion CIBIL, KNN India reported.

In a report, TransUnion CIBIL said outstanding MSME loans grew to Rs 25.2 lakh crore at the end of 2018 from Rs 10.4 lakh crore in 2013. It added that the consolidated non-performing assets (NPAs) in the sector increased to nine percent from 7.3 percent over the same period.

The report said, ‘Relaxation on the use of trade credit data from regulated bill discounting platform TReDS for credit scoring could help improve underwriting standards for banks, while also helping MSME businesses and individuals get better-priced loans.’

Last week, a report by TransUnion CIBIL and SIDBI found that the share of state-run banks in MSME loan disbursals have dropped from 58 percent to 39 percent in December 2018. The survey said this drop occurred despite policy thrusts such as Mudra loans and 59 seconds loans to help MSMEs as well as asset quality woes plaguing the state-run banks.

PTI reported TransUnion CIBIL Managing Director Satish Pillai saying:

“We have observed significant acceleration in lending in the past couple of years, but growth of this magnitude needs to be monitored carefully as rapid acceleration in debt build-up may indicate prospective stress in the system.”

He added, “While lenders should monitor their portfolios constantly for loan stacking, leverage, and debt build-up, the regulators must keep systemic risks under check.”

Due to the loss in share of state-run banks, the lending by private sector banks and non-banking financiers have increases, SIDBI and Cibil Transunion said. Their shares increased to 33 percent in December 2018 from 22 percent in December 2013, and up to 21 percent from 13 percent, respectively.

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