Loan disbursements to the micro, small and medium enterprise (MSME) sector in Q2 (July-September) FY23 grew 24 per cent year-on-year (y-o-y), with significant growth in the micro segment establishing that there’s increased inclusivity focus in the market, according to a TransUnion CIBIL-SIDBI MSME Pulse Report.

Micro, small and medium segments saw a growth of 54 per cent, 23 per cent and 9 per cent in disbursements, respectively.

Credit to the ‘micro’ (with aggregate credit exposure not exceeding ₹ 1 crore) segment by balance grew by 13 per cent y-o-y as of September 2022 vs 10.6 per cent y-o-y growth for overall MSME, per the report.

Very small (with aggregate credit exposure not exceeding ₹ 10 lakh), micro1 (with aggregate credit exposure between ₹ 10-50 lakh) and micro2 (with aggregate credit exposure between ₹ 50 lakh-1 crore) experienced growth of 20 per cent, 15 per cent and 11 per cent y-o-y respectively showing sudden spurt in micro lending, which is not just a post-pandemic bounce back, it added.

‘Reaffirms confidence’

“High growth in the micro segment reaffirms the confidence lenders have in this segment. 93 per cent of MSME entities are in the micro segment which contributes 25 per cent to the MSME portfolio. Due to formalisation of MSMEs and their adoption of platform-based banking services, it has enabled lenders to capture more data. This makes credit processing and loan delivery seamless, and makes underwriting and debt collection more granular, boosting confidence of financial institutions,” the report said.

Interestingly, more than 50 per cent of new originations came through new-to-credit (NTC) borrowers for the segment — which emphasises the importance of alternate data sources for effective underwriting.

Overall, MSME NPA (non-performing asset) rates (90 + days past due/DPD) was 12.5 per cent as on September 2022 (FY23-Q2), down from 13.9 per cent same time last year (FY22-Q2).

Delinquency rates dropped y-o-y across all the three lender categories (public sector banks/PSBs, private sector banks/PVBs and NBFCs); the highest drop was in PVBs segment (from 2.8 per cent in FY22-Q2 to 1.5 per cent in FY23-Q2).

MSME disbursements by amount in FY23-Q2 for public sector banks (PSBs), private sector banks (PVBs)and non-banking finance companies (NBFCs)grew by 21 per cent, 25 per cent and 34 per cent, respectively.

Credit exposure

Total MSME credit exposure (excluding default cases of about ₹ 1.2-lakh crore in doubtful category and about ₹ 1.3 lakh crore beyond 720 days past due/DPD/loss category) was at ₹ 22.9-lakh crore as of September 2022 (FY23-Q2), reflecting a y-o-y growth rate of 10.6 per cent.

The top ten States based on current outstanding MSME lending balances are Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Karnataka, Rajasthan, West Bengal, Telangana & Haryana. These top ten States constituted 72 per cent of the MSME outstanding balance as of September 2022, per the report. 

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