Balance-level delinquencies in the MSME loan portfolio of lenders are at their lowest levels in the last five years, at 1.79 per cent as of March 31 2025, improving by 35 basis points (bps) year-on-year. Indicating improved risk assessment and portfolio management practices, the delinquency rate improved from 2.14 per cent as of March 2024, as per the latest MSME Pulse report for May 2025 by TransUnion CIBIL and SIDBI.
Balance-level delinquency means the proportion of total outstanding credit balance which stands delinquent or unpaid by a certain number of days and classified as sub-standard.
The delinquency rate had deteriorated to 4.4 per cent as of September 2021 from 3.9 per cent as of March 2020 before improving to 2.4 per cent as of March 2023.
According to the report, the latest improvement has been driven by the borrower segment with Rs 50 lakhs to Rs 50 crore exposure, while less than Rs 50 lakh exposure segment has witnessed a slight deterioration in March 2025 compared to March 2024.
Among lenders, private banks held the best-performing portfolio with only 1.2 per cent delinquency, while public sector banks stood at 2.1 per cent as of March 2025.
Moreover, performance of new originations or vintage delinquency, measured as percentage of trades deteriorating to 90+ days past due within the first 12 months from origination, has witnessed a marginal increase for greater than Rs 10 lakh exposure segment in January-March 2024 originations.
For loans up to Rs 10 lakh, the vintage delinquencies since April-June 2023 originations have been on a rise, largely contributed by public sector units that hold a 52 per cent majority share of originations in January-March 2025 in this segment, according to the report.
Meanwhile, the MSME portfolio saw moderate growth, with the portfolio outstanding at Rs 35.2 lakh crore as of March 31, 2025, recording a 13 per cent growth from Rs 31 lakh crore as of March 31, 2024.
In January-March 2025 originations, 47 per cent of all new loans disbursed were to new-to-credit (NTC) borrowers, with PSUs leading the way by capturing 60 per cent of such originations. The trade sector, on the other hand, contributed to the highest proportion of NTC borrowers at 53 per cent, while the manufacturing sector witnessed the highest YoY growth at 70 per cent in the number of NTC borrowers originating a commercial loan.
The gross NPAs in the MSME sector had also reduced. According to the data shared by Shobha Karandlaje, Minister of State in the MSME Ministry in a written reply to a question in the Lok Sabha in December last year, GNPAs with respect to credit outstanding to MSMEs as of March 31, 2024, stood at Rs 1.25 lakh crore, down from Rs 1.30 lakh crore as of March 31, 2023, indicating year-on-year improvement in the asset quality.
The GNPAs have declined from Rs 1.87 lakh crore as of March 2020 and Rs 1.54 lakh crore as of March 2022.
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