New Delhi, Sept 18 (KNN) The contribution of private banks and non-bank financial companies in loans to micro, small and medium enterprises increased to over 41 percent as on June 30 from 37.7 percent a year ago, according to a report by Transunion CIBIL and Small Industries Development Bank of India.

The state run’s banks market share of loans to MSMEs has reduced significantly due to their strict lending norms to protect pilling up of bad debts.

As per their quarterly report, the share of 21 public sector banks has reduced to 50.7 per cent as of June 2018, from 55.8 per cent in June 2017 and 59.4 per cent in June 2016.

While the share of private banks rose from 28.1 percent to 29.9 percent, while NBFCs held on to 11.3 percent of the market compared to 9.6 percent a year ago.

The PSBs' non-performing assets (NPAs) from the MSME book increased to 15.2 per cent compared to previous year 14.5 per cent, while in case of private sector banks, the ratio decreased marginally to 3.9 per cent from 4 per cent.

The report further observed an increase in turn-around times (TAT) for loan processing across all the three segments of the lenders.

It said “there has been an increase in the turn-around times (TAT) for loan processing across all the three segments of lenders with the NBFCs being the fastest. It takes an average of 26 days for a MSME to avail credit from the date of enquiry.”

The NBFCs' TAT has come down to 18 days from the 24 days two years ago, while the same for PSBs is down to 31 days from 41 days earlier. Private sector banks process loans in an average of 29 days now as against 32 days two years ago.

However, the report said that the TAT has gone down for the low-ticket micro loans in the wide segment, while the large value loans have not seen much improvement.

“This finding signals a definite positive correlation between digitization and increase in efficiency of the commercial lending market," said Mohammad Mustafa, chairman and managing director, Small Industries Development Bank of India (SIDBI).

The total credit outstanding in formal lending has grown to Rs 101 lakh crore as of June, according to the report, of which Rs 22.8 lakh crore is for MSMEs and Rs 42.8 lakh crore for large and mid corporates.