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MSME credit grows 5.7 pc to Rs 19 lakh cr in Sept: Report
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SME Times News Bureau | 19 Feb, 2021
Findings from the TransUnion CIBIL-SIDBI MSME Pulse Report's latest
edition indicate that under the government's Emergency Credit Line
Guarantee Scheme (ECLGS), commercial credit enquiries surged 58 per cent
year-on-year (YoY) in June 2020 and stabilised toward the end of the
year, up around 13 per cent YoY) as of December, which is similar to
pre-Covid-19 growth levels.
The total on-balance-sheet commercial
lending exposure in India stood at Rs 71.25 lakh crore in September
2020, clocking a growth rate of 2.1 per cent YoY. For the MSME segment,
credit exposure stood at Rs 19.09 lakh crore as of September, showing
YoY growth of 5.7 per cent. This credit growth is observed across all
the sub-segments of MSME lending.
Report analysis indicates that
MSME loan originations growth, during January and February 2020, was
over 30 per cent YoY. However, this growth rate reduced significantly in
March and April months consequent to the Covid-19 lockdowns.
With
the launch of the ECLGS, loan originations surged in June, growing at
115 per cent over June 2019 and continued to be high and close to
pre-Covid-19 levels for the remainder of the year. This strong rebound
in MSME loan originations was driven by the existing-to-bank (ETB)
segment, the report said.
Borrowers, who have an existing
commercial credit relationship with the lender, are defined as ETB. This
is primarily due to the design of the ECLGS, where the guidelines
mandate lenders to extend 20 per cent of credit to existing borrowers.
Consequently, the YoY growth in ETB loan originations crossed 200 per
cent in the first month of the ECLGS infusion. Since then, this spike
has tapered off, but ETB originations continue to stay buoyant. On the
other hand, new-to-bank (NTB) originations are finding it hard to
recover to pre-Covid-19 levels.
On the findings of the MSME
Pulse, TransUnion CIBIL MD &CEO, Rajesh Kumar, said: "The resurgence
in MSME credit growth, which is back at pre-pandemic levels, is a very
promising indicator of economic recovery in our markets. Public Sector
Banks (PSB) are the leading drivers of this resurgence as they have
astutely wielded data analytics and credit information solutions to
swiftly comply with the ECLGS guidelines and dexterously implement
lending to MSMEs. Recent budget announcement have doubled the
contribution to the MSME sector over last year, which shall further
provide much needed financial support to the sector."
On studying
trends at a geographic level, a significant increase is observed in the
growth of loan originations in the urban, semi-urban and rural regions
which were subjected to less stringent and shorter lockdowns. Metro
cities which experienced stricter lockdowns showed muted growth. It is
observed that MSME credit disbursals in metro cities were most impacted
during April and May 2020. However, these have bounced back in June 2020
after the ECLGS implementation.
The report covers an analysis
based on the CIBIL Rank, which is an indicator of the credit risk
associated with MSMEs. CMR assigns a rank to the MSME based on its
credit history data on a scale of 1-10, CMR 1 being the best possible
rank and CMR 10 being the riskiest rank for MSMEs. In MSME Pulse report,
CMR transition is monitored for borrowers over a one-year period
starting September 2019 to September 2020 for rank buckets of CMR 1-3,
CMR 4-5, CMR 6-7 and CMR 8-10. It is observed that 36 per cent of
borrowers who were in CMR 1-3 bucket in September 2019 downgraded to
lower rank buckets by September 2020 and 15 per cent of the borrowers
who were CMR 4-5 in September 2019 upgraded to a higher rank bucket by
September 2020.
Further study on CMR downgrades across sectors
reveals that rank deterioration is relatively lower for MSMEs that are
focused on consumer staples or necessity sectors like auto,
infrastructure and FMCG and higher for MSMEs where consumer
discretionary spends are highest - sectors like hospitality, commercial
real estate and textiles.
Looking across segments, it is observed
that the Small and Medium segments have been least impacted due to the
economic slowdown as these have seen the lowest rise in the CMR
downgrade compared to the Micro segment of MSMEs.
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