Lending to Micro Segment Rises but to Small & Medium Contracts

Mumbai, Aug 12 (KNN) Lenders prefer micro enterprises in the MSME segment even as loans to medium-sized business fell, as per a latest report. 

Among lenders the smaller-the-better mantra seems to be gaining traction, according to quarterly data from the MSME Pulse, jointly brought out by the Small Industries Development Bank of India (SIDBI) and TransUnion Cibil.

Public sector banks are leading in MSME loan originations in the 'micro-segment' during the fourth quarter of 2022-23.

During this period, the "micro-segment," where credit exposure is less than Rs 1 crore, registered a 23% year-on-year growth in origination value, while the small segment, where credit exposure ranges between Rs 1 crore to Rs 10 crores, grew by 1%.

However, origination value in the 'medium' segment, where credit exposure ranges between Rs 10 crores to Rs 50 crores, declined 19%.

Commercial credit exposure stood at Rs 27.7 lakh crores in the quarter, which includes new loans of Rs 241,000 crore (-1.1% from the Q1FY22). Commercial credit demand (measured in terms of credit bureau inquiry volumes) grew by 33%. In comparison, credit supply volume rose by 11% year-on-year.

Credit supply volumes in the micro and small segments grew by 16% and 1%, respectively, while the medium segment declined by 8%.

"The progressive reforms introduced by the government for the MSME sector resurgence have borne fruit, as reflected in vigorous business activity and improved credit uptake in the micro and small segments. We encourage the credit industry to duly support this increasing demand by providing timely acci to credit opportunities for MSMEs, thereby contributing to the sustained growth of the sector and the economy to meet the government's USD 5 trillion economy objective," said Sivasubramanian Ramann, Chairman, and MD of SIDBI.

According to Rajesh Kumar, MD & CEO of TU Cibil, with rising demand, improved credit performance, and promising economic growth prospects, the time is conducive for lenders to expand their MSME credit portfolios. "India has approximately 630 lakh MSME corporates, of which only 250 lakh have availed credit from formal sources. While the sector continues to grow at a projected compound annual grou rate (CAGR) of 2.5%, the number of MSME corporate entities is expected to reach 750 lakhs by FY23," said Kumar.

He added that lenders can tap into the five crore new-to-credit MSMEs, connecting with them and customizing credit products to meet their requirements.

A state-by-state analysis shows that the credit growth rate was highest in Uttar Pradesh, Karnataka, Telangana, and Haryana, primarily driven by microloans. (KNN Bureau)