Enquiries by borrowers rose 13 per cent year-on-year as of December’20 with lending growth largely being driven by the MSME segment. The total on-balance-sheet commercial lending exposure in India stood at Rs 71.25 lakh crores in Sep’20, clocking a growth rate of 2.1% y-o-y.
Government’s initiatives under Emergency Credit Line Guarantee Scheme (ECLGS) has helped revival in credit demand to pre-COVID levels driven by public sector banks according to report by credit bureau TransUnion Cibil and MSME lender Sidbi . The report also cautions on the possibility of risk build-up in these loan portfolios
Enquiries by borrowers rose 13 per cent year-on-year as of December’20 with lending growth largely being driven by the MSME segment. The total on-balance-sheet commercial lending exposure in India stood at Rs 71.25 lakh crores in Sep’20, clocking a growth rate of 2.1% y-o-y. For the MSME segment, credit exposure stood at Rs 19.09 lakh crores as of Sep’20, showing y-o-y growth of 5.7%. This credit growth is observed across all the sub-segments of MSME lending.
Significantly, the growth in credit was driven by public sector banks. Their loan originations rose 30 per cent y-o-y in September- nearly double their pre-COVID-19 levels of 16% inFeb’20. For Private Banks the this growth was 16% in Sep’20. “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” said Rajesh Kumar MD and CEO, TransUnion Cibil.
Analysing the trend among geographies, loan originations rose sharply 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.
The highest beneficiaries of the rise in approval rates are high risk MSMEs with CIBIL MSME Rank (CMR) of 7-10 signalling caution and the need for regular monitoring of these portfolios. CMR is an indicator of credit risk for MSME loans.
“As we move ahead on path of growth, we need to carefully monitor the risk build-up signs, especially, in micro segment which is witnessing comparatively higher CMR downgrades” said V Satya Venkata Rao, deputy managing director, Sidbi.
Pandemic-related economic activity has led to a deterioration in borrowers’ credit profile, leading to higher CMR downgrades for Sep’19-Sep’20 period compared with the same period the year before. However, the downgrades are much more prononunced for higher consumer discretion spend sectors compared to consumer staple spend sectors largely in the Micro segment, the report said.