Banks’ MSME portfolio quality improves further as GNPAs drop below 5% in Sept- RBI report

Banks’ MSME portfolio quality improves further as GNPAs drop below 5% in Sept: RBI report

The quality of the MSME portfolio of scheduled commercial banks (SCBs) has further improved in the first half of the current financial year, said the latest Financial Stability Report by the Reserve Bank of India (RBI) released on Thursday. The MSME gross non-performing assets (GNPA) declined to 4.7 per cent in September 2023 from 6.8 per cent in March 2023 and 7.7 per cent in September 2022. In March 2022, the GNPA ratio was 9.3 per cent.

SMA-2 (special mention accounts), however, rose slightly to 1.7 per cent in September 2023 from 0.9 per cent in March 2023. The accounts wherein the borrower is unable to repay the loan amount for over 60 days and up to 90 days are classified asSMA-2.

While services represented 24 per cent of ECLGS delinquencies, trade had a share of 20 per cent. Moreover, textiles and food processing had 4 per cent and 6 per cent share respectively. The overall GNPA of loans extended under the ECLGS rose to 6.5 per cent in September 2023 from 5.5 per cent in March 2023.

ECLGS, which expired on March 31, 2023, saw almost 90 per cent of the total around Rs 2.91 lakh crore disbursals from SCBs. Contact-intensive services such as hotels and restaurants, travel agents, tour operators, private bus operators,carrepair services and more; and traders were the major sectors availing ECLGS loans.

The RBI report also noted increased lending by both public and private sector banks to MSMEs in H1 despite ECLGS expiry, points to the underlying growth momentum of the sector.

As of September, the credit growth by public sector banks was 16.4 per cent from around 14 per cent in March 2023 and around 5 per cent from September 2022. Likewise, private banks’ credit growth to MSMEs was 24.9 per cent in September this year in comparison to around 13 per cent in March this year and around 25 per cent in September last year, according to the report.

The gross bank credit deployed by banks to MSMEs under priority sector lending in October stood at Rs 23.15 lakh crore, according to the latest data on sectoral deployment by RBI. This was 22.8 per cent higher than Rs 18.8 lakh crore deployed in October last year and 11.8 per cent more than Rs 20.6 lakh crore deployed in September this year.

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