Motilal Oswal Financial Services: SMEs witnessed the sharpest decline in urban locations: Motilal Oswal Financial Services

MUMBAI: Despite the government and Reserve Bank of India efforts to push credit to micro small and medium enterprises, it witnessed the sharpest decline in the urban locations as per an analyst by Motilal Oswal Financial Services.

State wise distributor showed that Maharashtra reported the sharpest decline, followed by Gujarat, while Chhattisgarh and Bihar witnessed moderately improving trends. On an overall basis MSME credit declined by 6% at the end of June quarter over same period last year.

As per the latest TransUnion CIBIL MSME Pulse report, asset quality continued to deteriorate in this segment, with the NPA ratio increasing by 140 basis points to 12.8% at the end of the June quarter. NBFCs also witnessed significant increase in bad loans in the segment by nearly 390 basis points to 9.7%.

“Over the last few months the missed payments rate (at least on term loans) increased from 9% (pre-COVID levels) to 25% in the Super Prime category,” the Motilal Oswal report pointed out. “On the other hand, a sharp increase was seen in subprime category borrowers from 11% (pre-COVID) to 36%.”

What provided a much needed boost was the emergency credit line guarantee scheme. The impact was clearly visible in public-sector banks which disbursed 2.6 times the loan amount in June 2020 over February. Private banks also rebounded to pre-Covid disbursal levels.

As per the latest press release from the finance ministry, the total loans sanctioned under ECLGS stood at Rs 1.9 lakh crore, of which Rs 1.4 lakh crore has already been disbursed. Among the lenders, public sector banks disbursed Rs 68,800 crore, private banks sanctioned Rs 59000 crore while non-bank lender’s lagged behind with disbursals of Rs 2200 crore.

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