Home Borrower Loan disbursements to MSMEs double; banks stick to existing borrowers: report

Loan disbursements to MSMEs double; banks stick to existing borrowers: report

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Small business credit disbursements have doubled from pre-pandemic levels, but bankers appear to be cautious and are largely sticking to existing borrowers to extend loans, according to a report on Monday.

A report from a credit information company says demand for credit from micro, small and medium-sized enterprises (MSMEs), measured by the number of trade credit applications, was 1.6 times higher than before levels. the pandemic in FY22.

The total number of living borrowers in MSMEs stands at 7 million in March 2022, with a growth rate of 6% compared to the previous year.

“Growth in the total number of MSME borrowers has moderated as lenders focus on extending credit to existing borrowers,” Transunion Cibil’s report said.

Deepening credit to small businesses is a policy objective.

MSME credit disbursements have doubled from pre-pandemic levels across all segments, indicating that lenders are able to sustain growing demand for credit, according to the report.

On the asset quality front, total non-performing assets were 12.8% as of March 31, 2022.

NPAs in the MSME segment have been on the rise since March 2021 and the “micro” segment has been the most affected, according to the report.

With regulators allowing special restructuring dispensation, the report said 2.7 lakh accounts with outstanding credit of Rs 35,000 crore were labeled as restructured in March 2022.

State-owned lenders reported maximum restructured accounts at the trade office, followed by private banks and non-bank lenders, according to the report.

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