MSME loan disbursals up 40% during the COVID year, due to govt initiatives


MUMBAI: Fresh loans disbursed to MSME sector was 40 per cent higher during COVID-struck FY’20-21 with the number of new borrowers returning to pre-COVID levels, according to a report by MSME lender Sidbi and credit bureau Transunion-Cibil, thanks largely to the government initiatives Emergency Credit Line Guarantee Scheme (ECLGS) under the AtmaNirbhar Bharat programme

Findings indicate that loans worth Rs 9.5 lakh crores were disbursed to MSMEs in FY’21 compared to Rs 6.8 lakh crore in FY’20. Total on-balance sheet commercial lending to MSMEs at Rs 20 lakh crore as of March’21 was 6.6 per cent higher-year-on-year (y-o-y). But the overall total on-balance sheet lending rose only 0.6, the latest edition of the Sidbi – TransUnion CIBIL MSME Pulse Report said.

“The government’s initiatives like extending ECLGS support of around Rs 4 lakh crore, regulatory reforms like restructuring of loans and the swift implementation of these initiatives by the lenders using data analytics has fortified MSMEs has helped in higher disbursals” said Rajesh Kumar, managing director & CEO of TransUnion Cibil.

Significantly new borrowers or new-to-bank (NTB) which signals revival of credit demand has returned back to pre-COVID levels. “The recent additional relief measures by Government, especially in healthcare, travel and tourism, are expected to improve credit offtake in the MSME sector” said Sivasubramanian Ramann, chairman and managing director, Sidbi.

Lenders are relatively more open to lend to MSMEs which missed payments in last 12 months, the report indicates. ” 29% of the borrowers from MSME lending in Jan to Mar’21, have missed more than one payment in last three months. The same proportion for Jan’20 to March’20 was at 21%, indicating increasing acceptance of lenders to fund MSMEs with missed payments, the report said.

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However because of higher amount of credit flow to this sector, the NPA rates for MSMEs are controlled at 12.5% for March 21 compared to 12.6% for March’20. However, the NPA rates for March ’21 are higher than Dec.’20 (12%) coupled with credit downgrades, the report said. “Going forward, the lenders need to continuously monitor the health of credit portfolios, while sustaining credit growth to MSMEs”, said Sivasubramanian Ramann.



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