Despite recast, significant stress seen among MSMEs – RBI – The Economic Times

Clipped from: https://economictimes.indiatimes.com/small-biz/sme-sector/despite-recast-significant-stress-seen-among-msmes-rbi/articleshow/84056101.cmsSynopsis

“Despite the restructuring, however, stress in the MSME portfolio of PSBs remains high,” the regulator noted. “While PSBs have actively resorted to restructuring under all the schemes, participation by PVBs was significant only in the COVID-19 restructuring scheme offered in August 2020.”

The Medium, Micro and Small Enterprises are among the worst hit and they face enormous stress in meeting their payment obligations, the Reserve Bank of India said in its latest edition of Financial Stability Report. Seeing the build up of stress in the segment the regulator had promptly allowed recast of loans worth Rs 50 crore to struggling small companies to tide over the impact of the second Covid wave.

“Despite the restructuring, however, stress in the MSME portfolio of PSBs remains high,” the regulator noted. “While PSBs have actively resorted to restructuring under all the schemes, participation by PVBs was significant only in the COVID-19 restructuring scheme offered in August 2020.”

At the end of March 2021, for state owned lenders, 15.9% of loans less than Rs 25 crore to the MSME sector had turned bad. This was against a NPA ratio of 13.1% at the end of December 2020 and 18.2% at the end of March 2020. Loans due past zero days and 30 days also rose significantly to 60.7% and 10.6% respectively.

On the other hand private sector lenders recorded NPA ratio of 3.6% at the end of March 2021 against 2% at the end of December 2020 and 4.3% at the end of March. Loans due beyond zero days and 30 days also rose by 89.6% and 3.7% respectively.

As of February 2021, 80% of the MSME borrowers moved into high-risk category as per data released by the regulator.

“Given the elevated level of debt of the stressed cohort, the implications of business disruptions following the resurgence of the pandemic could be significant,” the RBI noted.

As per data with the RBI, the banking industry together restructured loans worth Rs 36,000 crore under the August 2020 Covid loan restructuring scheme. Public sector banks held the lions share at Rs 24,816 crore while private banks recast MSME loans worth Rs 11,027 crore.

In contrast to this PSBs have been laggards in lending to this sector with aggregate MSME exposure growing at a paltry 0.89% in the last fiscal year ended March 2020. For private lenders this exposure grew 9.23% during the same time.

Though the regulator noted that the Covid emergency guarantee loan scheme set up by the government significantly contributed to the credit growth in this sector.

“Growth in credit to MSMEs during 2020-21 was aided by the ECLGS scheme, with aggregate sanctions at Rs 2.46 lakh crore at the end of February 2021,” RBI noted. “For Public sector banks credit to the sector remained flat and new disbursements turned negative, after adjusting for interest accretion on past loans; private banks on the other hand, showed relatively robust increase in exposure.”

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