Credit Growth & Falling NPA to Boost MSME Sector
Thiruvananthapuram: As per a study conducted by TransUnion CIBIL and Small Industries Development Bank of India (SIDBI), the continued growth in credit and overall drop in non-performing assets (NPA) have signalled a growth of Micro Small and Medium Enterprises (MSME) sector in the country. The report has attributed a 12.4 per cent year-on-year (Y-o-Y) growth of MSME credit in the quarter ending March 2019.
Total credit availed by MSME sector has increased at a CAGR of 13.3 per cent in a five-year period from March 2015 to March 2019. Borrowers include government, corporate entities and individuals. The growth in aggregate credit in the past four years is powered by a 22 per cent CAGR growth on lending to individuals (including consumer loan, business loan to individuals and other loans), 13.4 per cent CAGR of lending to commercial entities (including MSME and corporate entities) and a 10.6 per cent of government credits. According to experts, the comparatively higher rate of individual lending has translated into a major shift in the composition of the lending industry in favour of individuals.
A marked decline in NPAs adds a silver lining to these growth trends. The overall gross NPA rate in commercial lending stood at 16.0 per cent in March 2019 – a significant lowering from 17.2 per cent during the same period last year. NPA rate had reached its peak in the period between March 2018 and June 2018 for medium and large segment. However, after experiencing a long period of stress, the commercial credit sector has been undergoing correction following a decline in NPAs post second quarter in 2018-19.
Highlighting the findings of the report, Mohammad Mustafa, Chairman and Managing Director, Small Industries Development Bank of India (SIDBI), said: “The sustained growth in commercial lending along with marked lowering of NPAs is a very promising indicator of MSME sector growth which plays a pivotal role in catalysing economic development. Even more interesting is the trend on increasing rate of individual lending for businesses which brings a major shift in the composition of the lending industry in favour of individuals, he added
The Y-o-Y incremental changes are also taken into consideration for identifying the market growth for the period between FY15 and FY19. As part of risk index, delinquency and score quality (risk profile) of customers in the geography is observed. The study shows that Gujarat has emerged as the top ranking State in terms of performance and growth potential for MSME lending in India followed by Andhra Pradesh, Haryana, Karnataka and Delhi. Other states with high potential in MSME corporate lending are Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Jammu & Kashmir.
“The state-wise performance insights throw significant light on the credit opportunity, potential of MSME growth and risk predictors across India. Gujarat has been consistently ranked number one over the last four years. While Maharashtra ranks highest on market size, its higher NPAs suggest credit risk. Close monitoring of MSME portfolios and timely risk identification and control measures are crucial towards achieving healthy MSME growth and sustained economic development,” said Satish Pillai, Managing Director and CEO of TransUnion CIBIL.