New Delhi, May 28 (KNN) Two out of three Micro, Small and Medium Enterprises (MSMEs) are well placed to sail through the nationwide lockdown while 31 percent are very strongly positioned, said TransUnion CIBIL and SIDBI MSME pulse shows.

The report findings are based on a scenario testing done from past events like the implementation of GST and the IL&FS crisis, the report observed that the structurally stronger MSMEs are likely to be least impacted during the lockdown.

"While the impact of the lockdown may be more pronounced than that of the earlier events, but the core essence of the simulation study highlights that structurally stronger MSMEs will be the least impacted," the MSME Pulse report said.

The findings of the study on the structural position of MSMEs prior to the lockdown concludes that ''63 percent -- or almost 2 out of 3 active MSMEs -- are in the structurally strong risk segment of CMR (CIBIL MSME Risk) 1 to 5 and are well placed to surge through this lockdown.''

The report also noted that from the 63 percent, about 31 percent are very strongly positioned, with CMR 1 to 5, and working capital utilisation levels of less than 70 percent.

The remaining 37 percent of active MSMEs are seen in the CMR 6-10 segment, which is at high risk. Within this segment, about 22 percent are at highest risk, with more than 70 percent utilisation levels, the study said.

The outbreak of the Covid-19 pandemic will impact the profitability of MSMEs due to the declining market demand and rising operating costs in the new way of working.

In such a situation, while providing moratorium is RBI mandate, “the challenge is to separate MSMEs that are making use of the moratorium to bring back their cash flows from the MSMEs that are just delaying the default cycle,” the report noted.

As per the report, the total on-balance sheet MSME segment exposure stood at Rs 17.75 lakh crore as of January 2020.

The study noted that the MSME segment has observed lowering of credit exposure across most sub-segments of MSME lending in the last few quarters. Large corporate segment is at Rs 46.7 lakh crore credit exposure and has observed a year-on-year expansion of 6.3 per cent.

The MSME credit continues to have lowest default rate in commercial lending as Public sector banks had non-performing loan ratio of 18.7 percent as of December 2019 in the MSME segment, compared to 18.1 percent in December 2018, the report said.

Private banks had NPAs of 5 percent as of December 2019 versus 3.8 percent in December 2018, and NBFCs had NPAs of 7.6 percent in December 2019 against 4.9 percent in December 2018 for the MSME segment.

The default rates across all MSME segments continue to be lower than large corporate NPA rates. The NPA rates for micro segment MSMEs have remained stable. Within the micro loans segment, less than Rs 10 lakh ticket size loans have observed a reduction in default rates.