MUMBAI:
The seventh edition of TransUnion CIBIL- SIDBI MSME Pulse Report shows a marked slowdown in commercial credit growth in the quarter ending Jun‘19.
This slowdown comes post a sustained quarter-on-quarter (QoQ) steady growth performance in the commercial credit segment over the last few years. The year-on-year (YOY) commercial credit growth stood at 10.4% in the quarter ending in Jun’19. However, the QoQ comparison indicates a 2.6% decline in credit exposure in the quarter ending Jun’19 over Mar’19. The total on-balance sheet commercial lending exposure in India declined to ?63.8 Lakh Crores in Jun’19 from Rs65.5 Lakh Crores in Mar’19.
A marginal deterioration in asset quality is also observed with the Non-Performing Assets (NPA) rate surging to 16.1% in Jun’19 from 15.5% in Mar‘19. The overall NPA rate of commercial lending was at 17.2% in Jun’18 so despite the reason increase seen is still less than a year ago.
NPA rates in Micro and SME segment have remained range bound between 8.5% (Jun’18) to 8.7% (Jun’19) and 10.6% (in both Jun’18 and Jun’19) respectively over the last year. Growth in credit exposure is proportional to gross NPA amount in Micro & SME segment and therefore the NPA rate remains range bound. It is crucial to note that the NPA rate in commercial lending was at a peak of 17.2% in Jun’18.
This edition of MSME Pulse also covers a study on the credit risk build-up in the Auto Industry MSMEs. The study analysed the transition matrix of the Auto Industry MSMEs based on the CIBIL MSME Rank (CMR). CMR is a credit score for MSMEs where the score output rank values range from 1 to 10. CMR predicts early signs of risk. Typically, MSMEs with CMR-1 to CMR-3 are considered lowest risk, CMR-4 to CMR-6 are considered medium risk and CMR-7 to CMR-10 are the highest risk.
Transition matrix provides an indicator of portfolio movement across different time periods by observing rank downgrades and magnitude of rank downgrades (1-notch, 2- notch) which are an early indicator of risk. The magnitude of 2-notch downgrades in the transition matrix plotted for auto industry MSME’s is in the range of 14% to 24% during June’18 to June’19 whereas the corresponding numbers were 12% to 15% during June’17 to June’18. This indicates that the good MSMEs in the Auto industry have downgraded more than last year.
Commenting on this finding, the Managing Director and CEO of TransUnion CIBIL, Satish Pillai, said: “Even though the underlying risk for good MSMEs in Auto industry may be increasing, these MSMEs still have lower NPA rates than MSMEs from other industries. However, we are noticing accelerated degradation in Auto Industry MSMEs which have been maintaining better CMR. We will continue to carefully monitor these early signs of credit risk build up. With progressive policies and support, we can expect the Auto industry to maintain a strong position in the Indian economy.”
It is important to note that the Auto industry has historically been one of the best performing industries on credit growth and asset quality. While some of the other industries, like Textiles and Construction have seen a rise in the NPA rates, Auto industry continues to be the lowest delinquent industry over the years.
