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MSME Credit Demand At High While Delinquencies Decline: Report

The TransUnion CIBIL-SIDBI MSME Pulse Report indicated that the credit growth in the micro segment owing to an improvement in lender confidence

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The TransUnion CIBIL-SIDBI MSME Pulse Report notified the lender’s ability to supply timely credit to resilient MSMEs and claimed the sector’s accelerated growth trajectory. 

The report further indicated the credit growth in the micro segment owing to an improvement in lender confidence. 

According to the study, the measures on the formalisation of MSMEs and the adoption of digital platforms by lenders have enabled in accessing of granular data on enterprises. Thus, improving lending confidence, especially among the micro1 segment of MSMEs.

It added that credit demand is correlated to business improvement activities and grew at 1.29 times year-over-year (YoY) in the quarter ending September 2022, while credit supply remained stable with disbursement growing by 24 per cent YoY. Micro, small and medium enterprises grew at 54 per cent, 23 per cent and 8 per cent in disbursements YoY, respectively.

Meanwhile, the overall, MSME credit exposure is at Rs 22.9 lakh crores as of September 2022, reflecting a YoY growth rate of 10.6 per cent. While bank type-wide analysis of credit exposure hints public sector banks holding for Rs 7.9 lakh crore, private banks hold Rs 10.1 lakh crore, and non-banking financial companies (NBFCs) account for Rs 3.1 lakh crore of share. 

Approximately 77 lakh total number of live MSME borrowers grow at 11 per cent YoY. Subsequently compromising small segment enterprises in the highest proportion in the MSME credit book at Rs 9.5 lakh crore. Micro and medium enterprises on the other hand hold Rs 5.8 lakh crores and Rs 7.6 lakh crores, respectively.

Speaking on the findings Sivasubramanian Ramann, Chairman and Managing Director of SIDBI, said: “The progressive reforms introduced by the government for MSME sector resurgence have borne fruit as reflected in the vigorous business activity and improved credit uptake by enterprises across all the segments. We would encourage the credit industry to duly support this increasing demand by providing timely access to credit opportunities for MSMEs, thereby contributing to the sustained growth of the sector and the economy to meet the government’s USD 5 trillion economy objective.”

Adding to this, the Managing Director and CEO of TransUnion CIBIL, Rajesh Kumar, said, “Demand for credit from the MSME sector is at an all-time high, and supply by the credit industry remains stable while delinquencies have declined."

MSME lending continues to be concentrated in states that have higher industrialisation. The top ten states based on current outstanding MSME lending balances are Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Karnataka, Rajasthan, West Bengal, Telangana and Haryana.