TransUnion CIBIL- SIDBI MSME Pulse Shows Speedier Recovery in Credit Growth

MUMBAI:
The third edition of TransUnion CIBIL- SIDBI MSME Pulse Report shows that commercial credit growth continues to rise steadily with 10.1% YOY growth in the Jun’18 quarter.
The report further states that the total lending exposure in India stood at Rs 101 lakh crores as of Jun’18 of which MSME credit accounts for ?22.8 lakh crores, which includes credit to MSME entities and credit to individuals for business purposes. The NPA rates on MSME loans have remained stable and range bound. In the Micro entity segment, the NPA rate has declined from 8.9% (in Jun’17) to 8.7% (in Jun’18);in the SME entity segment the NPA rate hovered between 11.2% (in Jun’17) to 11.5 % (in Jun’18).
It is interesting to note that NPA levels in loans taken by individuals for business purposes are significantly lower and have remained under 2.5%.MSME Pulse closely tracks and monitors the MSME segment in the country on a quarterly basis.TransUnion CIBIL Commercial Bureau has over 6.7million live business entities ranging from proprietorship/partnership firms to publicly listed entities. The credit data is updated monthly with exposure and performance details from Banks, NBFCs, HFCs, Cooperative banks, Regional Rural Banks and other regulated lenders.
Speaking of this report, Mohammad Mustafa, Chairman and Managing Director, SIDBI said“The most noteworthy finding of this edition of MSME Pulse is the significant improvement in TAT on lending to MSMEs across credit institutions. Data shows that TAT has continuously improved for MSME segment underwriting- from an average of 32 days in 2016 to under 26 days in 2018, while at the same time usage of bureau data and digitization has increased. This finding signals a definite positive correlation between digitization and increase in efficiency of the commercial lending market.The report further delves into category-wise TAT,defined as the number of days between the date of enquiry and the date of loan sanctioned or renewal date. It indicates that NBFCs have demonstrated the lowest TAT on MSME lending at 18 days in 2018 from 24 days in 2016. While Public Sector Banks (PSBs) still have the longest TAT, they have demonstrated the maximum reduction in TAT for the MSME segment- from 41 days in 2016 to 31 days presently. Private bank TATs have also lowered from 32 days in 2016 to 29 days presently.
Yet another key highlight from the report is the fact that New to Bank (NTB) borrowers are driving MSME credit growth. MSME Pulse finds that lenders have to face an exit of 14% in their books over a one year period. During the same time the MSME borrowers continuing with the lender have only contributed to a 2% increase in the balances. The 20% growth in the overall MSME portfolio is driven by the NTB segment borrowers who contribute a chunk of 32% to the MSME portfolio growth.
Highlighting the capabilities of data analytics and insights*, the Managing Director and CEO of TransUnion CIBIL –Satish Pillai said “We continue to partner with financial institutions to help them drive efficiency and find interesting pockets of profitable growth. As a case in point, among the 4 segments within Commercial (Micro, Small, Mid and Large), MSME Pulse analysis shows that the Micro and Small segments continue to do well, posting healthy growth of 21% and 14% respectively, with delinquencies being stable for last 8 quarters (unlike Mid and Large segments, which have shown a reduction in loan growth and a significant increase in delinquencies). The valuable insights, products and solutions in the Commercial bureau space can significantly help in the sustainable growth of the Commercial credit sector.”
Private MSME PulseThird QuarterEdition Highlights
Total credit exposure in India stands at Rs 101 lakh crores: Total credit exposure stood at Rs 101 lakh crores as of Jun’18. MSME credit accounts for Rs 22.8 Lakh Crores including credit to MSME entities and credit to individuals for business purposes. Large and MID Corporates account for Rs 42.8lakh crores. Other than Rs 35.4 Lakh Crores of Agricultural and Retail credit segment, the MSME credit exposure is at 35% of the overall exposure to businesses.
Credit growth recovery on a firm footing: Year-on-year (YOY) commercial credit growth continues to rise clocking 10.1% YOY growth in the Jun’18 quarter. Overcoming the low growth in Sep’17, Large (greater than ?100 Crores exposure) segment has shown two consecutive quarters of high credit growth signalling sustainability in the large corporate segment. Micro (exposure less than Rs 1 Crore) and SME (Rs 1 Crore-Rs 25 Crores) segments constitute Rs 13.2 Lakh Crores credit exposure (23.5% of commercial credit exposure) with YOY growth of 21% and 14% respectively. In comparison it is 5.1% for MID (Rs 25 Crores-Rs 100 Crores) and 8.9% for Large (greater than Rs 100 Croresexposure) from Jun’17 to Jun’18.
Significantly lower NPA rates for loans taken in individual capacity: MSME NPA rates have remained stable and range bound. In the Micro entity segment, the NPA rate has moved from 8.9% (in Jun’17) to 8.7% (in Jun’18). In SME entity segment the NPA rate hovered between 11.2% (in Jun’17) to 11.5% (in Jun’18). It is interesting to note that NPA levels on loans taken by individuals for business purposes are significantly lower and have remained under 2.5%.
Private Banks & NBFCs continue to gain market share: Private Banks and NBFCs have further increased their market share in Micro and SME lending- from 28.1% and 9.6% in Jun’17 to 29.9% and 11.3% respectively in Jun’18. Share of Public Sector Banks (PSBs) has fallen from 55.8% to 50.7% in the same period.
TAT for lending improves further with NBFCs lending fastest: TAT for lending to MSME entities have shown a continuous improvement- from 32 days in 2016 to 26 days in 2018. While NBFCs have the lowest TAT in this segment, PSBs have demonstrated the most significant rate of improvement in TAT during this period- from 41 days in 2016 to 31 days recently. NBFCs have a significant TAT advantage in the Rs 10 Lakhs- Rs 710 Crores lending segment, which stems from the fact that NBFCs have a larger proportion of program based parameterized lending, while Private Banks and PSBs have large proportion of working capital loans with subjective assessment.
Increased TUCL Commercial Bureau usage has helped in TAT reduction: Credit Institutions across categories are increasingly accessing CIBILCommercial Credit Reportsand this has significantly helped in reducing the TAT in credit sanctions to MSMEs. While the penetration rate of credit reports to credit sanctioned has increased from 30% in 2016 to 49% in 2018, the TAT decreased from 32 days to 26 days. PSBs have experienced the sharpest TAT improvement from 41 days to 31 days and they also have the best improvement in penetration rate of credit reports to credit sanctioned from 17% in 2016 to 36% this year.
New-To-Bank (NTB) segment largely contributes to MSME portfolio growth: A movement-of-book is studied for lenders in the MSME space to trace where the portfolios are moving and how the MSME books are growing. The study finds that lenders have to face an exit of 14% in their books over a one year period. During the same time the MSME borrowers continuing with the lender have only contributed to a 2% increase in the balances. The 20% growth in the overall MSME portfolio is driven by the NTB segment borrowers who contribute a chunk of 32% to the MSME portfolio growth.
Lower portfolio growth in PSBs is largely due to high attrition: Private Banks achieve a 4% growth on continuing borrowers through 18% enhancements while losing 14% portfolio through exits. Hence with a NTB acquisition of 30%, private banks are able to grow the portfolio by 34%. In comparison, PSBs face a 12% de- growth from exits and 3% de-growth in continuing borrowers. Hence even after having an NTB acquisition of 24% which is not much lower than Private Banks, the overall portfolio growth is at 9% in the MSME space. NBFCs have a much higher rate of exit and NTB acquisition but that is largely owing to the fact that majority of
loans are term loans.