PSBs share in MSME credit plunges

Mumbai: Despite the many a policy thrust on helping small businesses like the Mudra and 59 seconds loan schemes, the share of the state-run banks in loan disbursals to the MSME segment has plunged to 39 percent in December 2018 from a high 58 percent five years ago, says a report.

According to a report by the Small Industries Development Bank of India (Sidbi), the government's specialised vehicle to uplift the sector, and credit information company CibilTransunion, the plunge is due to the asset quality woes plaguing the state-run banks.

And the loss of the state-run banks has been the gain of private sector banks and non-banking financiers, which in the meanwhile, grew at a much faster clip, leading to an increase in their market share to 33 percent in December 2018 from 22 percent in December 2013, and up to 21 percent from 13 percent, respectively.

The report did not quantify the credit disbursals in absolute terms though. It can be noted that the government has been giving a lot of focus to the MSME segment through schemes like Mudra and another one under which loans are passed in just 59 seconds, which was launched by Prime Minister Narendra Modi last year with much fanfare.

The massive fall in the credit share of state-run banks is striking as normally, government schemes are driven on the back of state-run banks.

"Going forward, we expect that state-run banks would be able to claw back some of their lost share as they come out of the prompt corrective action (PCA) framework of the Reserve Bank," the report said Thursday.

The PCA is the special provision wherein the Reserve Bank restricts a lender's activities due to various reasons including high non-performing assets.

From an NPA perspective, the MSME segment showed an improvement in the quarter to December 2018, and SidbiChairman and Managing Director Mohammad Mustafa considers this, along with credit growth, as a promising indicator.

The overall credit to the MSME segment grew 19.3 percent per annum during the five years ending December 2018, the report said.

Managing Director and Chief Executive of TransunionCibil Satish Pillai said growth of this magnitude needs to be monitored carefully as rapid acceleration in debt build-up may indicate prospective stress in the system.

Lenders should monitor their portfolios constantly for loan stacking, leverage and debt build-up, the regulators must keep systemic risks in check, he added.