Four lakh new borrowers have entered formal financial fold has risen post demonetisation and GST with small ticket size loans posting the fastest growth, a study by credit bureau Transunion -Cibil and Sidbi showed. Significantly small borrowers registering their businesses post GST too has seen a sharp rise, it said.
The number of new MSME- micro small and medium enterprises -borrowers entering the formal credit sector has risen from 2.7 lakhs for the six-month period from of January to June 2016 to 4 lakhs in the period between July to Dec 2017. Small ticket borrowings, loans upto Rs 10 lakhs has seen a highest growth, posting a 31% growth between December 2016 and December 2017 with about 34 lakh new firms registering for GST in the same period.
However, this comprises a small portion of SME borrowers’ universe. “The MSME sector remains significantly under-penetrated on the organised lending front. Out of the 51 Million MSME units, only 5 Million units have access to formal credit” Mohammad Mustafa, chairman and managing director, Sidbi.
The study covers five million entities across the country relying on formal finance including commercial banks, regional rural banks, fintech companies and NBFCs.
One of the key findings of the study is that MSME’s have much lower NPA rates (8% to 12%) than large corporates (16%) or mid-sized corporates (15%). The study also finds that MSMEs with exposure between 10 Lakhs to 5 crores have among the lowest delinquency rates in the entire commercial /corporate banking space.
The study concludes there is significant scope to increase credit access for MSMEs while reducing the cost of borrowings to the borrowers through use of data analytics provided in the study not just for data analytics, but also for formulating policy actions. “MSME segment, if targeted and serviced appropriately, can grow to have substantial share of Indian bank’s commercial balance sheets and profits in the next 3-4 years” said Satish Pillai, managing director and CEO, TransUnion CIBIL.
The report, while giving an insight on the prominent MSME sectors for the lending institutions from a risk and profitability perspective, also presents the effects of dual economic disruptions of demonetization and GST along with the impact of relief measures announced by RBI for MSMEs registered under GST.