MSMEs' bad loans rises last quarter, says report
New Delhi, Oct 18 (KNN) Despite several steps taken by the Finance Ministry to tackle slowdown in the Micro Small and Medium Enterprises (MSMEs), the growth in credit to the country’s small businesses continued to slide in the June quarter and bad loans rose.
According to TransUnion Cibil and Small Industries Development Bank of India (SIDBI) data, credit growth across MSME and mid-sized corporates fell. Mid-sized corporates, credit growth fell to 3.6 per cent in the quarter ended June over a year ago. While credit to MSMEs grew at a faster clip of 12 per cent, growth was lower than in the previous quarter, shows comparative data from the last four editions of the MSME Pulse report.
Non-Banking Financial Corporation (NBFC) credit to MSMEs achieved another height and rose 13.7 per cent between June 2019 and June 2018. This is much slower than the 39.4 per cent growth seen in NBFC credit to this segment between June 2017 and June 2018. Further, NBFC credit outstanding declined by 1 per cent over the January-June 2019 period compared with the same period last year. NBFCs credit growth was at 17.9 per cent last year in the January-June period.
Bad loans across all categories of the MSME segment rose, although they remained below the default rates for large corporates.
Mid-sized corporates had the highest ratio of non-performing assets at 17.5 per cent. For SMEs, the NPA ratio rose to 10.6 per cent, while for micro enterprises the NPA ratio stood at 8.7 per cent.
“Growth in credit exposure is proportional to gross NPA amount in Micro and SME segment and therefore the NPA rate remains range bound. Crucial to note that NPA rate in commercial lending was at a peak of 17.2 percent in June 2018,” the report said.
“In the case of NBFCs, in particular, the absolute NPA amount has also increased in the range of 25-28 percent. The NPA rate for NBFCs has escalated to 5.9 percent in the quarter ending June 2019 from 4.4 percent in June 2018,'' the report said.