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10/01/2020 11:42am

Despite efforts, MSME bad loans rise: CIBIL

image Despite efforts, MSME bad loans rise: CIBIL

Mumbai, Jan 10 (KNN) Despite many efforts, Non-performing assets (NPAs) of Micro Small and Medium Enterprises (MSMEs) have risen 50 basis points (bps) to 12.2 per cent as of September 2019, as against 11.7 per cent in September 2018,  said a data from a credit information company TransUnion CIBIL.

The data further revealed that bad loans in the small and medium sector are rising despite the overall decline in bad loans in the commercial lending business of the banking sector.

However, the overall NPAs of commercial lending declined 20 bps to 16.8 per cent in September last, marginally lower than 17 per cent in September 2018, the report said.

As per the the Cibil study, the bad rate on MSME borrowers, rose to 3.02 per cent in the quarter ended September 2019 from 2.94 per cent in the September 2018 quarter.

“Major factor contributing to this marginally higher bad rate is the increase in the share of lending towards lower vintages and high risk borrowers in Q2 of FY19. Study on vintage distribution of borrowers acquired in Q2 of FY19 shows that there is a significant increase in the acquisition of lower vintage borrowers (with credit history of 1-4 years),” Cibil said.

“At a time when commercial credit growth was slowing down, growing 8.1 per cent over the year, gross NPA has increased by only at 6.8 per cent resulting in lowering of NPA rate by 20 bps. The gross NPA amount increased from Rs 10.2 lakh crore in September 2018 to Rs 10.9 lakh crore in September 2019,” it added.

NPA rate in commercial lending was at a peak of 17.5 per cent in June 2018, but due to various reform measures, it fell to 16.8 per cent, Cibil said.

The report said credit growth stood at 7.7%, 4.6%, and 1.9% for micro, small and medium enterprises, respectively, between September 2018 and September 2019. Commercial credit growth stood at 8.1% y-o-y.

According to TransUnion Cibil, CMR is a credit score for MSMEs pointing at early signs of risk, with values ranging from 1 to 10. Typically, MSMEs with CMR-1 to CMR-3 are considered lowest risk, CMR-4 to CMR-6 are considered medium risk and CMR-7 to CMR-10 are the highest risk, the credit information bureau said.

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