NBFCs to continue to dominate the lending space to MSMEs: Report
Mumbai: Non-banking financiers will continue to dominate the lending space to MSMEs which have been out of the formal credit system […]
Sarabjit Kaur November 23, 2017
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Mumbai: Non-banking financiers will continue to dominate the lending space to MSMEs which have been out of the formal credit system for long, and their share of loans to this segment is expected to reach over 20 per cent in the next two years, says a report. As of fiscal 2017, the MSME credit market stood at Rs 14 trillion which may grow by 11 per cent each in the next two years, rating agency Crisil said on Wednesday. “Over the past five fiscals ending 2017, non-banking finance companies recorded a four-fold increase in their credit book to MSMEs. Consequently, their cumulative market share in MSME financing rose to 18 per cent in fiscal 2017 from 8 per cent five years ago,” Crisil said, adding this will rise to over 20 per cent in two years. Lenders have been trying to protect their return on assets by focusing on smaller loans, where yields are higher, and on unsecured loans. For NBFCs, unsecured loans account for 20 per cent of the MSME portfolio as of March 2017. And the agency sees the trend continuing for at least the next two years. “Over the next two fiscals, too, we expect NBFCs to outperform banks with sharper focus on small-ticket loans, adoption of technology and data analytics, and focus on smaller towns and cities.” Overall the formal credit to the MSME sector is seen clipping at 11 per cent each over the next two years, it said, adding, however, this is lower than the 13 per cent. This is against industrial credit growth of around 7 per cent.