MSME Credit Continues to Grow at a Healthy Rate Signalling Rapid Revival: Report
Total debt in India, including government debt, as well as debt of corporate entities and individual borrowers, has increased at a compounded annual growth rate (CAGR) of 13.3% to reach the level of Rs253 lakh crore during the past five years ending March 2019, says a report.
The sixth edition of TransUnion CIBIL- SIDBI MSME Pulse Report says the growth in aggregate debt in the past four years is powered by a 22% CAGR growth on lending to individuals, including consumer loan, business loan to individuals and other loans, 13.4% CAGR of lending to commercial entities, including MSME and corporate entities and a 10.6% of government debt.
A marked decline in non-performing assets (NPAs) adds a silver lining to these growth trends, the report says adding overall gross NPA rate in commercial lending stood at 16.0% in March 2019- a significant lowering from 17.2% during the same period last year.
It says, "NPA rate had reached its peak in the period between March 2018 to June 2018 for medium and large segment. However, after experiencing a long period of stress, the commercial credit sector is on the course to recovery as the NPAs have finally started showing a gradual decline post June 2018 quarter."
Commenting on the report, Mohammad Mustafa, Chairman and Managing Director, SIDBI says, "The sustained growth in commercial lending along with marked lowering of NPAs is a very promising indicator of MSME sector growth which plays a pivotal role in catalysing economic development. Even more interesting is the trend on increasing rate of individual lending for businesses which brings a major shift in the composition of the lending industry in favour of individuals. These findings bode well towards the ease of doing business in India with MSMEs being able to get faster and easier access to credit for driving business growth."
This sixth edition of MSME Pulse covers a study on state-wise performance analysis on MSME lending under "credit opportunity" and "risk index" parameters based on a model of ranking the potential of states towards extending credit to MSME corporate entities defined basis the aggregate credit exposure up to Rs50 crore.
The study shows that Gujarat has emerged as the top ranking state in terms of performance and growth potential for MSME lending in India followed by Andhra Pradesh, Haryana, Karnataka and Delhi. Other states with high potential in MSME corporate lending are Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Jammu & Kashmir.
Commenting on this finding on state wise performance, Satish Pillai, MD and chief executive (CEO) of TransUnion CIBIL says, "The state-wise performance insights throw significant light on the credit opportunity, potential of MSME growth and risk predictors across India. Gujarat has consistently ranked no. 1 over the last four years (FY16 to FY19).
While Maharashtra ranks highest on market size, its NPAs are also high indicating increase in credit risk. Close monitoring of MSME portfolios and timely risk identification and control measures are crucial towards achieving healthy MSME growth and sustained economic development."