Public sector banks' share in MSME lending dips to 39 percent: TransUnion CIBIL- SIDBI report

The share of state-run banks in loan disbursals to MSMEs has dropped from 58 percent to 39 percent in December 2018, a report by SIDBI and Cibil Transunion said.

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.

Due to this loss, private sector banks and non-banking financiers have gained, 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.

The findings come around one month after Kotak Mahindra Bank announced it has become the first private sector lender to join MSME loan platform psbloansin59minutes.com. Through this medium, it offers in-principle approval on MSME loans of up to Rs 1 crore to MSMEs. The portal also provides applicants with an eligibility letter and in-principle approval after the bank is chosen.

With the entry of such private players, the massive fall in the credit share of state-run banks is striking, the report added. ‘Normally, government schemes are driven on the back of state-run banks’: it said, adding, ‘going forward, we expect state-run banks would be able to claw back some of their lost share as they come out of the prompt corrective action (PCA) framework of the Reserve Bank of India.’

The PTI media report contained an explanation of the PCA framework. The PCA is the special provision wherein the RBI restricts a lender's activities due to various reasons including high non-performing assets (NPA). From an NPA perspective, the MSME segment showed an improvement in the quarter to December 2018, it said.

Overall credit to the MSME segment grew 19.3 percent per annum during the five years ending December 2018, the report added.

“Growth of this magnitude needs to be monitored carefully as rapid acceleration in debt build-up may indicate prospective stress in the system," said Satish Pillai , Managing Director and Chief Executive, Transunion Cibil. He added, "Lenders should monitor their portfolios constantly for MSME loan stacking, leverage and debt build-up, the regulators must keep systemic risks in check.”

In January 2019, a TransUnion CIBIL- SIDBI pulse report revealed that the non-performing asset rate for micro enterprises reduced to 8.5 percent from 8.7 percent between September 2017 and September 2018. It also showed that NPAs in SMEs reduced minimally to 11.3 percent from 11.4 percent over the same period.

ALSO READ:

Kotak Mahindra to offer Rs 1 crore loan to MSMEs, becomes first private bank to join PM's 59-minute initiative

NPAs in commercial lending up 2 pc, NPAs in MSME lending down 0.1 pc: TransUnion CIBIL- SIDBI report