The slowdown in the economy in the wake of the Covid pandemic in the last two years has hit the Micro, Small and Medium Enterprises (MSMEs) the most, despite a host of debt restructuring plans and packages announced by the Reserve Bank of India (RBI) and the government.
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Gross non-performing assets (NPAs), or loans defaulted by these enterprises, of MSMEs rose by Rs 20,000 crore to Rs 1,65,732 crore as of September 2021, from Rs 1,45,673 crore in September 2020, RBI said in a statement. said in response. Right to Information (RTI) Application Indian Express,
According to RBI, bad loans to MSMEs now account for 9.6 per cent of the gross advances of Rs 17.33 lakh crore as against 8.2 per cent in September 2020. In fact, the bad loans of MSMEs were reduced by Rs 1,47,260 crore (8.8 per cent). of advances) in September 2019, only to be taken up again in 2021.
Explained
No relief for small units
RBI says public sector banks account for a major chunk of Rs 1,37,087 crore in MSME NPAs. Among state-owned banks, PNB had MSME NPAs of Rs 25,893 crore as of September 2021, followed by State Bank of India at Rs 24,394 crore, Union Bank at Rs 22,297 crore and Canara Bank at Rs 15,299 crore, says RBI.
The loan turns into a non-performing asset when the principal or interest becomes overdue after 90 days.
Bad loans increased even after RBI announced four debt restructuring schemes for MSMEs in January 2019, February 2020, August 2020 and May 2021. Loans of 24.51 lakh MSME accounts worth Rs 1,16,332 crore were restructured under these schemes. , According to the RBI’s ‘Trends and Progress of Banking’ report, in May 2021, loans worth Rs 51,467 crore were restructured under the circular issued by the RBI.
As per RBI definition, investment of a micro unit should not exceed Rs 1 crore and turnover should not exceed Rs 5 crore, investment of small units should not exceed Rs 10 crore and turnover should not exceed Rs 50 crore and a medium The investment of the enterprise should not exceed Rs 50 crore. and turnover of Rs.250 crores.
The MSME sector was one of the worst-hit sectors. Thousands of MSMEs either shut down or fell ill after the government announced a strict nationwide lockdown in the wake of the COVID pandemic in March 2020. To revive the activity, the RBI and the government introduced several measures, including the Emergency Credit Line Guarantee Scheme (ECLGS), which provided unsecured loans of Rs 3 lakh crore to MSMEs and business. RBI also extended the scheme of one-time restructuring of loans to MSMEs without asset classification downgrade and also allowed bank lending to NBFCs (other than MFIs) to classify agriculture, MSMEs and housing as priority sector lending (PSL). Gave permission. ,
Banking sources said the restructuring plans and packages did not benefit thousands of units which were already in default. This is because to be eligible under the ECLGS scheme, the borrower accounts should have been less than or equal to 60 days as on February 29, 2020.
According to the RBI’s Financial Stability Report, credit to the MSME segment slowed down (y-o-y) by the end of September 2021 as compared to March 2021. The decline was especially noticeable in major bank groups with ticket sizes of less than Rs 25 crore.
Under ECLGS, loans worth Rs 2.82 lakh crore were sanctioned till November 12, 2021, of which Rs 2.28 lakh crore (Rs 1.94 lakh crore by commercial banks, 20.6 per cent of the incremental credit during this period) was disbursed . said.