TransUnion CIBIL MSME Pulse Report

MSME Credit Demand Surges as Markets Open Post Unlock in Jun’21

Findings from the latest edition of the SIDBI – TransUnion CIBIL MSME Pulse Report indicate that in FY 2021, loans worth ₹9.5 lakh crores were disbursed to MSMEs.

This amount is much higher than the preceding year- FY 2020, when loans amounting to ₹6.8 lakh crores were disbursed. Government interventions like Emergency Credit Line Guarantee Scheme (ECLGS) under the Atmanirbhar Bharat program was the major factor in driving this significant surge in credit disbursement to MSMEs. The total on-balance sheet commercial lending exposure in India stood at ₹74.36 lakh crores in March ’21, with YOY growth rate of 0.6%. MSME segment’s credit exposure stood at ₹20.21 lakh crores as of March ’21, showing YOY growth rate of 6.6%. This credit growth is observed across all the sub segments of MSME lending.

Credit demand sees a sharp surge post unlocks after both the pandemic waves

Report analysis shows a significant surge in credit demand post unlocks after the 1^st and 2^nd wave of the pandemic. Followed by the initial drop in commercial credit enquires by 76% during the 1st wave, they recovered rapidly backed by ECLGS intervention and have since sustained close to pre-COVID-19 levels. March ’21 commercial credit enquiries were at 32% over pre-COVID-19 levels; this strong momentum was impacted by the 2nd wave, but June ’21 again showed a sharp recovery to pre-COVID-19 levels.

Profile of MSME borrowers getting fresh loans has changed in 2021

In order to understand the insights on the key shift in MSME lending, this edition of MSME Pulse covers an analysis¹ of borrower profiles of entities getting funded post-COVID wave-1 compared to entities getting funded pre-COVID wave-1. CIBIL Rank (CMR) assigns a rank to the MSME based on its credit history data on a scale of 1-10, CMR 1 being the best possible rank and CMR 10 being the riskiest rank for MSMEs. Post-COVID wave-1, there’s a reduction in new originations on high-risk MSME entities (CMR 8–10). This reduction is offset by an increase in originations in CMR 6–7, implying lenders reduction in risk appetite and the difficulty in finding good MSMEs in the range of CMR 1-5 in the current uncertain environment. This trend is also echoed through an analysis done using TransUnion CIBIL’s CreditVision® (CV) algorithm of missed payments, which shows that finding MSMEs with an absolutely clean track record is harder. The analysis captures the payment behavior of MSMEs against their outstanding obligations. Insights reveal that:

Of the MSME that were given loans in the period of January to March ’21, 29% had missed more than one payment in last three months
Of the MSMEs that were given loans during January to March ’20, 21% had missed more than one payment in the preceding three month