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MSMEs’ exposure to credit increasing despite GST and Demonetization: CIBIL-SIDBI report

Despite demonetization and GST fever, the credit growth in the MSME sector improved, according to a CIBIL-SIDBI joint report.
In the last five quarters, the overall growth exposure registered the highest growth at Rs 54 lakh crore as on March 2018, noted MSME Pulse quarterly report.
According to the report, the MSME exposure constitutes 23% of this, which means Rs 12.6 lakh crore is the overall credit exposure to MSME for the same period of time.
Further, the report pointed that the micro-credit of less than Rs 10 million and SMEs of Rs 10-250 million grew by 22 per cent and 13 per cent, respectively, as on March, 2018, implying that the self-inflicted pain due to GST and demonetization is over.
Commenting over this, Mohammad Mustafa, CMD, SIDBI said that the MSMEs are firmly back on the growth path with the segment having an exposure below Rs 250 million growing at 25%.
He said high growth in new credit shows the positive impact of GST.
“Bad loans moderated in the sector but it was too early to conclude that it’s bottoming out”, he added.
The report further highlighted that the fresh NPAs may be driven by Rs 11,000 crore standard credit exposures, belonging to companies who have at least one or more credit exposures as NPA by other bank or credit institution.
As such, there’s a system-wide exposure of Rs 1.2 lakh crore of those entities with CIBIL MSME Rank (CMR) of 7 to 10 — associated with high risk.
With such a high exposure, Rs 16,000 crore are expected to be added in NPAs by March 2019, according to report.
“However, strong credit demand in this segment among other things driven by the formalization of MSME segment is likely to keep the overall NPA rate in this segment in check,” the report said.
With the entering of new private banks in providing lending facility to MSME sector, their share of lending touching 30.03% as on March, 2018 while that of NBFCs grew marginally to 10.9 per cent from 9.1 per cent earlier.
In other words, the share of public sector banks fell from 57 per cent to 50.4 per cent.
Also, Mustafa noted that recent move taken by RBI to allow banks to recognize NPAs in 180 days as against the previous norm of 90 days past due date for MSMEs is expected to bring relief worth Rs 15,000 crore of exposure.