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In 5 years, MSME loans jump 2.5 times, NPAs move up too

Mumbai: The outstanding loans of Indian lenders to the micro, small and medium enterprises (MSMEs) expanded two-and-a-half times in five years through 2018, credit information company TransUnion CIBIL said, while also warning about debt build-ups leading to possible stress in the quality of assets. 

While the outstanding credit to MSMEs grew to Rs 25.2 lakh crore at the end of 2018 from Rs 10.4 lakh crore in 2013 at a compound growth rate of 19.6 per cent, the consolidated non-performing assets (NPAs) in the sector increased to 9 per cent from 7.3 per cent, CIBIL said in a report, published in association with Small Industries Development Bank of India (Sidbi). 

“We have observed significant acceleration in lending in the past couple of years, but growth of this magnitude needs to be monitored carefully as rapid acceleration in debt build-up may indicate prospective stress in the system,” TransUnion CIBIL managing director Satish Pillai said in a news release on Thursday. “While lenders should monitor their portfolios constantly for loan stacking, leverage and debt build-up, the regulators must keep systemic risks under check.” 

In the reported period, while public sector banks remained the largest lending group to the segment, their loan exposure fell to 39 per cent from 58 per cent as the central bank imposed lending restrictions on several banks that were saddled with bad debt. 

CIBIL, in the report, said relaxation on the use of trade credit data from regulated bill discounting platform TReDS for credit scoring could help improve underwriting standards for banks, while also helping MSME businesses and individuals get better-priced loans. India’s commercial credit growth remained strong at 14.4 per cent year-on-year in the December quarter, taking the overall outstanding credit to Rs 111 lakh crore, driven by loan growth of 14.9 per cent to large companies, the report said.