MSME loan disbursements doubled compared to the pre-pandemic levels: Report

Credit disbursements to small businesses have doubled compared to the pre-pandemic levels but bankers seem to be cautious and are largely sticking to existing borrowers in extending the loans, a report said on Monday.

The report by a credit information company said demand for credit from the Micro, Small and Medium Enterprises (MSMEs), measured by the number of commercial credit enquiries, was 1.6 times of the pre-pandemic levels in FY22.

Total live MSME borrowers stand at 7 million as on March 2022 with a growth rate of 6 per cent over the previous year.

"The growth in overall MSME borrowers has moderated as lenders are focusing on extending credit to existing borrowers," the report by Transunion Cibil said.

Deepening credit to small businesses is a policy objective.

MSME credit disbursements have doubled compared to the pre-pandemic levels across segments, indicating that lenders are in a position to support the increasing credit demand, the report said.

On the asset quality front, the overall non-performing assets was 12.8 per cent as on March 31, 2022.

NPAs in the MSME segment have been on the uptrend since March 2021 and the 'micro' segment has been hurt the most, the report said.

With the regulators allowing for a special dispensation on restructuring, the report said that 2.7 lakh accounts having a credit outstanding of Rs 35,000 crore were tagged as restructured as of March 2022.

The state-owned lenders reported maximum restructured accounts to the commercial bureau followed by private banks and non-bank lenders, the report said.

Term loans are restructured more than working capital loans, which was termed as a positive sign because it indicates that MSMEs are managing their liquidity through CC/OD (Cash Credit/Overdraft) loans prudently, it added.