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MOSL: FINANCIALS-Private banks gaining market share in MSME loans

Financials: Private banks gaining market share in MSME loans

 

We delved into the latest ‘MSME Pulse Report’ published by the TransUnion CIBIL.

Key highlights:

• MSME loans (entities and individuals) grew 20% YoY to INR25.2t in 3QFY19, of which loans to individuals accounted for INR10.4t (+25% YoY) and loans to entities formed INR14.8t (+17% YoY). MSME loan CAGR stood at 19.3% over 3QFY14-3QFY19. MSME loans now form 23% of overall system loans.
• Aggregate MSME lending as a proportion of nominal GDP increased by 400bp to 13.6% over 3QFY14-3QFY19.
• Overall GNPA in commercial lending (which includes large corporate, mid-corporate, SME and micro loans) was at 16.7% as of 3QFY19 versus 16.5% in 3QFY18. The commercial credit sector now seems to be on the course of a recovery, as NPAs have been on a downtrend since 1QFY19.
• Over 3QFY14-3QFY19, private banks have expanded their market share in MSME lending from 22.0% to 33%, while PSBs’ market share has shrunk from 58% to 39%. However, TransUnion CIBIL expects PSBs to recoup their lost market share in the MSME segment with six PSBs coming out of the PCA framework.
• The ongoing trend of increasing formalization and financial inclusion has increased the number of new MSME borrowers entering the formal credit sector. The number of new to credit (NTC) borrowers has increased from ~3.0 lakh in 1QFY18 to ~5.2 lakh in 1QFY19.