Credit and finance for MSMEs: Stress in the MSME loan portfolio because of low resilience in the sector has always been a concern for financial institutions. In fact, the Reserve Bank of India (RBI) in its June Financial Stability Report (FSR) noted that even as the gross NPA ratio of banks in the MSME sector dipped from 11.3 per cent in September 2021 to 9.3 per cent in March 2022, the bad assets in the sector remain relatively high.
However, over the last few years, there has been a sharp decline in NPAs not just in the top end of the segment but also in the micro and small, said Neha Gupta, Managing Director and Partner, Boston Consulting Group (BCG) at the SME Artha 2022 event organised by FE Aspire recently. One reason for this, Gupta said, is how MSMEs get better at managing their business and how banks and NBFCs start looking at early warnings (of stress) in the sector.
Gupta further explains the current scenario of bank NPAs in the MSME sector, the role of enablers in the MSME ecosystem, and NBFC lending.