Private banks, NBFCs continue to chip away at PSB market share

Interestingly, a majority of the annual growth in MSME lending until December, 2018 was from private banks and NBFCs with market shares increasing by about 400 and 300 bps respectively. Credit growth to MSMEs remains healthy, while non-performing loans are stable, but private banks and NBFCS continue to gain market share at the expense of PSU banks, according to a recent MSME study by TransUnionCIBIL. The report added that MSME accounts for about 23 per cent of total loans in India as on December, 2018 and overall growth trends have been solid at 20-25 per cent in recent times. “Rise in credit penetration, greater availability of data owing to increased formalization of economy and focus towards increasing share of noncorporate loans act as headwinds to growth going ahead,” noted M B Mahesh, CFA, Kotak Institutional Equities Research. Interestingly, a majority of the annual growth in MSME lending until December, 2018 was from private banks and NBFCs with market shares increasing by about 400 and 300 bps respectively. However, PSU banks are still the majority providers of credit to MSMEs holding about 40 per cent share. But, this has consistently reduced in the last five years from 58 per cent in 3QFY14, Mahesh said. Going forward, the trend is likely to moderate as more PSU banks come out of the PCA framework and the impact of liquidity issues shows up in the numbers for NBFCs.

 

Meanwhile, overall asset quality has been stable though the quality of disclosures are weaker-than-reported in the past Transunion-Cibil study. Bad loans in the corporate portfolio were the highest but saw a declining trend at 19 per cent of loans. This was 17 per cent in the mid-corporate segment, but has also been declining for the past two quarters. Liquidity impact to become clearer According to TransUnion-CIBIL, trends over the next few quarters will be important, NBFCs, who have played a critical role in recent years in credit expansion to these segments have been impacted due to liquidity and its effect would be known by then