National Small Industries Corporation (NSIC) has sought to dispel lenders’ perception that MSEs are a “high risk” area, quoting RBI statistics to prove that the percentage of NPAs of micro & small enterprises has actually been on a decline.
A set of data compiled by NSIC Chairman H P Kumar related to credit demand and non-performing assets (NPAs) for the country’s micro and small enterprises (MSEs) proves that banks’ fears while lending to them, perceiving the credit may turn into a bad loan, are totally unfounded.
“The problem is of risk perception. The MSE sector is considered to be a high-risk area by banks, which means the sector’s NPAs must be high,” Kumar said.
Quoting Reserve Bank statistics, he said that in March 2010, the NPAs of MSEs were Rs 20,067 crore. In March 2011, they rose to Rs 21,000 crore whereas in March 2012 and 2013, the sector reported bad loans of Rs 26,000 crore and Rs 31,000 crore, respectively.
On the other hand, gross NPAs in sectors other MSEs stood at Rs 61,741 crore in March 2010, which rose to Rs 71,862 crore in March 2011, further went up to Rs 1,10,000 crore in March 2012, and to Rs 1,52,000 crore in March 2013.
Although March 2014 figures are not available on RBI website, Kumar said, other sources indicate this figure has ballooned to a whopping Rs 2,38,000 crore.
“The perception of the lenders that MSE sector is a high- risk area is totally false. In fact, while the NPAs percentage in micro and small enterprises has been steadily declining, the NPAs percentage in terms of borrowers of other sectors has been consistently increasing at a fast rate.”
“The government has introduced credit guarantee scheme even then the lending has not improved to the extent it should have. Our major concern has been availability of finance to the sector,” Kumar pointed out.
Moreover, total credit demand of the MSME (including medium enterprises) sector as on March 2013 was Rs 25,41,000 crore whereas the supply of credit was only Rs 10,38,948 crore, proving that the supply of credit as compared to demand was only 41 per cent, meaning there was a credit gap to total demand to the extent of 59 per cent.
However, Kumar said it has come down slightly to 56 per cent as on March 2014.