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TransUnion CIBIL- SIDBI MSME Pulse Quarterly Report signals sustained credit growth recovery

Jaipur, 07 January, 2019: The fourth edition of TransUnion CIBIL- SIDBI MSME Pulse Report shows that commercial credit growth recovery continues at 13.5% YOY growth in the Sep’18 quarter. The report further states that the total on-balance sheet credit exposure in India stood at ₹ 105.5 lakh crores as of Sep’18 of which MSME credit accounts for ₹24.7 lakh crores, including credit to MSME entities and credit to individuals for business purposes. The overall gross NPA rate of commercial lending was at 17.5% in Sep’18 versus 15.5% in Sep’17. The stock of gross NPA in commercial exposure increased by ₹2.23 Lakh Crores in Sep’18 over Sep’17. TransUnion CIBIL Commercial Bureau has over 7 million live business entities ranging from proprietorship/partnership firms to publicly listed entities. The credit data is updated monthly with exposure and performance details from Banks, NBFCs, HFCs, Cooperative banks, Regional Rural Banks and other regulated lenders.

Speaking on this report, Mr. Mohammad Mustafa, Chairman and Managing Director, SIDBI said “This edition of MSME Pulse throws some very interesting insights with reference to the credit cost to MSMEs. Data analysis on Credit cost study reveals that fresh NPA Rate of the MSME segment has been between 1% – 1.5% per quarter and recovery rates have been between 0.4% – 0.8% depending on type of loan and risk associated with the borrower. The industry annual credit cost in the 4 quarters is 1.8% from Jun’17 to Jun’18. The Return on Asset (ROA) of lending in the segment is estimated at 2% – 5%, which is a healthy rate of return. MSME segment continues to be profitable for the credit industry and promises potential of growth and healthy returns”.

The fourth edition of MSME Pulse also covers insights from a loan stacking study which highlights that default rates in borrowers taking multiple loans from multiple lenders within a period of 60 days have increased from 2.5% to 4.4% during Sep’15 to Sep’18 period. This implies that stacked loans by borrowers have a higher potential of turning into NPAs. This phenomenon is predominantly observed on loans sanctioned by NBFCs. The study shows that 45% of the sanctions showing Loan Stacking behaviour belong to loans sanctioned by NBFCs and 23% of the borrowers who have taken loans from NBFCs fall in this category.

Cautioning MSME lenders on loan stacking behaviour, the Managing Director and CEO of TransUnion CIBIL –Mr. Satish Pillai said “MSME Lenders must keep track and closely monitor borrowers seeking and availing loans from multiple lenders within a period of 60 days. Our study has observed a direct correlation between loan stacking behaviour and probability of default by such borrowers. The risk of default on loans taken by borrowers who have stacked their loans has increased in the last 3 years and therefore lenders must establish prudent processes and policies to detect and mitigate risks arising from loan stacking behaviour. Regular monitoring of portfolios can alert the lender and enable timely intervention to deter defaults and losses.”

There are overall 128 lending institutions having MSME portfolio size of ₹100 crores and above. Of these, 77 are NBFCs which together hold a market share of 17% on new credit sanctions during Apr’18 to Sep’18. The study also reveals that NBFCs are most active in the top 10 locations (basis portfolio size), where they account for 22% of fresh loan sanctions to the MSME segment. Sectors which are most dependent on NBFC funding include Transport & Logistics, Real Estate, Education, Healthcare, Mining & Construction.”

About SIDBI

Small Industries Development Bank of India (SIDBI), is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. SIDBI meets the financial and developmental needs of the MSME sector with a Credit+ approach to make it strong, vibrant and globally competitive. SIDBI has adopted thrust on MSE and digital offerings as its mainstay. For more information, visit www.sidbi.in.

About TransUnion CIBIL

TransUnion CIBIL is India’s leading credit information company and maintains one of the largest repositories of credit information globally. We have over 3000 members–including all leading banks, financial institutions, non-banking financial companies and housing finance companies–and maintain more than 1000 million credit records of individuals and businesses.

Our mission is to create information solutions that enable businesses to grow and give consumers faster, cheaper access to credit and other services. We create value for our members by helping them manage risk and devise appropriate lending strategies to reduce costs and increase portfolio profitability. With comprehensive, reliable information on consumer and commercial borrowers, they are able to make sound credit decisions about individuals and businesses. Through the power of information, TransUnion CIBIL is working to support our members drive credit penetration and financial inclusion for building a stronger economy.

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