The country’s biggest lender by assets has seen non-performing assets (NPA) hit a high of 20% in its Mudra loan portfolio of ₹26,000 crore. “In terms of quality, it is a challenge,” chairman Dinesh Khara tells Fortune India.
Though Mudra loans are also covered under the ambit of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the bank will not be able to secure its entire ₹26,000 crore exposure. “CGTSME will cover 75% of the book and 25% will be ours…we have a challenge in this book,” added Khara
Most of the loans under the PM Mudra Yojana (PMMY) scheme are unsecured loans of up to ₹10 lakh extended to daily wage earners—including small hawkers and vendors—besides small entrepreneurs. In FY21, of ₹3.21 lakh crore of Mudra loans sanctioned to around 51 million borrowers, ₹3.11 lakh crore was disbursed compared to disbursals of ₹3.29 lakh crore in FY20 (See: Painful Mudra).
Further, the bank has also notched up 9.22% (₹26,203 crore) NPAs in its MSME book of ₹2.84 lakh crore. According to the SIDBI-TransUnion CIBIL MSME Pulse Report, in FY21, ₹9.5 lakh crore was disbursed to MSMEs compared with ₹6.8 lakh crore in FY20.
Though Khara mentions that the bad loan levels in the MSME portfolio have largely been around the 9-10% levels, this time around borrowers are pro-actively seeking restructuring of loans. “While restructuring, we are carefully examining what is the scope of their cash flows getting restored. So, that way it (restructuring) is subjected to greater scrutiny. If at all there is permanent damage to cash flows then we are encouraging them to go for a restructuring,” said Khara.
Further, the bank has also notched up 9.22% (₹26,203 crore) NPAs in its MSME book of ₹2.84 lakh crore. According to the SIDBI-TransUnion CIBIL MSME Pulse Report, in FY21, ₹9.5 lakh crore was disbursed to MSMEs compared with ₹6.8 lakh crore in FY20.
Though Khara mentions that the bad loan levels in the MSME portfolio have largely been around the 9-10% levels, this time around borrowers are pro-actively seeking restructuring of loans. “While restructuring, we are carefully examining what is the scope of their cash flows getting restored. So, that way it (restructuring) is subjected to greater scrutiny. If at all there is permanent damage to cash flows then we are encouraging them to go for a restructuring,” said Khara.
However, Khara points out that only small value accounts are being restructured. “These are majorly working capital in the ₹5 to ₹10 lakh bucket involving MSMEs with a turnover of around ₹50 lakh… they are the really small MSMEs,” mentioned Khara.
On the impact of the Emergency Credit Line Guarantee Scheme (ECLGS), Kahara said it is still early days. “We have to wait for some more time till it matures. It’s a little premature to comment on that book.”
Though the MSMED Act mandates money to MSME suppliers be paid within the stipulated time of 45 days, 60% of small enterprises have seen their receivables locked up beyond 45 days. Given that post-June 16, the unlocking of the economy has been in phases, a lot of businesses across states have not been able to function normally.
“They (MSMEs) have not been into activity for the last 45-40 days and this has broken the working capital cycle. If the economy unlocks and cash flow gets restored, their (MSMEs) ability to comeback is very strong,” summed up Khara.
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