TransUnion CIBIL in association with MoSPI launch MSME Credit Health Index

New Delhi, Nov 3 (KNN) In a bid to help measure growth and strength of the Micro, Small and Medium Enterprises (MSMEs), TransUnion CIBIL has partnered with Ministry of Statistics & Programme Implementation (MoSPI) to build and publish quarterly MSME Credit Health Index.

The MSME Credit Health Index will provide the Government, policy makers, lenders and other stakeholders, insights and analysis on various aspects of health of the MSME industry, thus enabling them to make better policy and business decisions with respect to MSME lending. The ease of access of such comprehensive information with a single MSME Credit Health Index will facilitate better risk management and inclusion of MSMEs in Indian banking and financial system.

The Index will also help to educate the general public about the credit health of the MSME sector and thereby instil confidence.

The MSME Credit Health Index is built using credit data as submitted by Credit Lending Institutions (CLIs) to TransUnion CIBIL. The Index looks at two critical aspects of the credit health of the MSME industry – Growth and Strength. Growth is measured by increase in exposure value over time, and strength is measured by decreasing risk in terms of Non-Performing Assets (NPA). March 2018 has been taken as a fixed benchmark to compute the Index values.

''The MSME sector comprises over six crore enterprises, contributes nearly 29 per cent of India’s Gross Domestic Product (GDP) and provides employment to over 11 crore workers. Being a vital engine for growth, it is important to continuously monitor and measure the strength, growth and progress of the MSMEs, so that policies can be aligned and timely interventions taken,'' said Kshatrapati Shivaji, Secretary, MoSPI in a statement.

''MoSPI is happy to partner with TransUnion CIBIL to introduce the MSME Credit Health Index as a new and alternate data source for use in policy making for the MSME sector,'' he added.

''The Index is available at national level and granularly across MSME segments, lender categories and geographies. The objective of the Index is to support MSMEs, lenders and policy makers with an efficient tool to monitor and benchmark the movement in the micro-ecosystems of the MSME sector. The ongoing monitoring of the index will provide insights for aligning strategies and policies towards efficient implementation of funds and resources for sustained development of the MSME sector,'' said Rajesh Kumar, MD and CEO, TransUnion CIBIL.

Overall analysis of the Growth Index reflects muted growth in June 2020 owing to limited credit activity consequent to the containment measures implemented by the Government to curb the spread of COVID-19 pandemic.

The MSME sector has seen an increased level of NPAs in the last two years consequent to a slower economic growth. Cash flows of MSMEs have got impacted over a period of time thereby limiting their ability to service debts. This has resulted in the Strength Index reflecting a decreasing trend. The improvements seen in March are due to improved recovery and collection efforts by lenders before the close of financial.

At a sub-segment level, the momentum of growth has been the highest for the Micro segment. Most of the digital lending innovation has taken place in the micro loan segment. Lenders have adopted an analytic driven underwriting approach supported by alternate data in this segment that has propelled its growth. On the other hand, Medium enterprises continue to be evaluated in a more traditional way.

Further, the concentration risk being higher in the Medium segment because of loan size being large, this segment has become less attractive for lenders in general.

At a lender category level NBFCs and Private banks have shown a better growth momentum. Private banks have contributed to over 50 per cent of incremental credit to the MSME sector in the last two years. NBFCs were the fastest growing category in 2018. The liquidity crisis towards the end of 2018 limited the ability of NBFCs to extend credit. As a consequence, NBFC credit growth slowed down in 2019. PSU banks have seen a muted credit growth in the last two years.

The Strength Index by lender category reflects a relatively faster decline for Private banks driven by few players experiencing higher stress in their portfolio compared to others. However, it is also pertinent to note that the NPA rates of Private banks, despite showing an accelerated increase, continue to be at much lower level compared to PSU banks and NBFCs