MSME NPA Levels Expected to Rise in Next Six Months: FICCI-IBA Bankers’ Survey

Non-performing asset (NPA) levels in the Micro, Small, and Medium Enterprises (MSME) sector are anticipated to rise over the next six months, according to the latest FICCI-IBA Bankers’ Survey. The H1 2024 survey, which involved 22 banks representing public, private, and foreign sectors, covering approximately 67% of the banking industry, revealed that 38% of respondents expect an increase in MSME NPAs during the coming six months.

Apart from MSMEs, other key sectors projected to see a rise in NPAs include agriculture and textiles, with 50% and 45% of respondents, respectively, predicting a spike in bad loans. Additionally, the gems & jewellery and food processing industries are also on the radar, with 30% and 25% of respondents, respectively, expecting a rise in NPAs in these sectors.

The survey further noted that the percentage of respondents expecting a jump in MSME NPA levels remained unchanged at 38%, consistent with the H2 2023 survey.

The FICCI-IBA report, released last week, highlighted the critical role of banks in helping India achieve its goal of becoming a $30 trillion economy by 2047. Despite the increasing formalization and data footprint of MSMEs, banks face challenges in maintaining profitable lending relationships within the sector. The report emphasized the need for lenders to rethink their MSME lending strategies, potentially leveraging data from sources such as bank statements, tax records, and payment gateways to improve outcomes.

In terms of actual figures, gross NPAs in MSME loans issued by scheduled commercial banks dropped by 14.3% to ₹1.31 lakh crore in FY23, down from ₹1.54 lakh crore in FY22. This marked the lowest level of GNPAs for MSMEs in the past five years, following a peak of ₹1.83 lakh crore in FY20.

Despite this decline, banks continue to write off substantial amounts in bad loans related to micro and small enterprises. In FY24, banks wrote off ₹20,261 crore, compared to ₹28,392 crore in FY23.

Disclaimer: The information provided in this article is based on news updates and reports gathered from various internet sources. While every effort has been made to ensure the accuracy and reliability of the information, we encourage readers to verify the details independently before making any decisions.