Credit demand in the MSME sector reached an all-time high

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- Largest share of small segment enterprises in the credit book of the sector

As lenders are able to provide timely credit to resilient MSMEs, the sector is on a fast growth path. The report also shows benchmark credit growth in the micro segment due to improvement in lender confidence. Measures such as formalization of MSMEs and adoption of digital platforms by lenders have enabled them to access extensive data on enterprises and improved their confidence to lend, particularly to the micro segment of MSMEs, says the TransUnion CIBIL-SIDB MSME report.

Data from the report shows that credit demand (measured in terms of credit inquiry volumes) correlated with improvement in business activity and grew by 1.29 times year-on-year in the quarter ended September 2022, while credit supply remained stable with lending volume growing at 24 percent year-on-year. had been Micro, small and medium enterprises have grown in distribution at the rate of 54 per cent, 23 per cent and 8 per cent year-on-year respectively.

Overall, MSME credit exposure by September 2022 will be Rs. 22.9 lakh crore which shows an annual growth rate of 10.6 percent. A comprehensive analysis of credit exposure by different bank type shows that public sector banks have Rs. 7.9 lakh crore, private banks Rs. 10.1 lakh crore and non-banking finance companies Rs. 3.1 lakh crore share. The total number of 77 lakh live MSME loan borrowers is growing at an annual rate of 11 percent. Small segment enterprises in the MSME credit book have the highest Rs. 9.5 lakh crore, while micro and medium enterprises account for Rs. 5.8 lakh crore and Rs. 7.6 lakh crores.

MSME credit has been concentrated in more industrialized states. The top ten states based on current outstanding MSME credit balance include Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Karnataka, Rajasthan, West Bengal, Telangana and Haryana. These top ten states accounted for 72 percent of the MSME outstanding balance as of September 2022. Among these ten states, Gujarat and Haryana recorded the highest growth rate of 15 percent and 14 percent respectively. On the other hand, Rajasthan and Gujarat had the lowest delinquency rates (the rate of non-payment of loans on time) at 1.8 percent and 1.85 percent respectively. The progressive reforms introduced by the government for the revival of the MSME sector are showing good results as it has given a great boost to business activity and has improved credit uptake by industrial units in all segments. Properly supporting this growing demand by providing timely credit opportunities to MSMEs to the credit industry and contributing to the sustainable growth of the economy will support the government's objective of a five trillion US dollar economy.

Credit demand from the MSME sector is at an all-time high and supply by the credit industry is stable while loan defaults have declined. These findings prove that the credit industry is able to harness the power of insights and data analytics to identify eligible MSMEs and intelligently approach credit opportunities across business sectors and geographies. The rapid pace of innovation driven by the government, regulators and the credit ecosystem has significantly strengthened the MSME sector to continue its high growth trajectory. These innovations have provided the capabilities to form the triangular axis of power of financial, revenue and trade information.


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