Restructuring expected to be highest for MSMEs, would lead to an 18% jump in stressed workers this fiscal year: Crisil

Credit and financing for MSMEs: Banks’ gross non-performing assets (ANP) are expected to increase to 8-9% in this fiscal year, although below the peak of 11.2% seen at the end of fiscal 2018, due to the measures. Covid relief, including a restructuring waiver and the emergency line of credit. The guarantee scheme (ECLGS) will help restrain growth, rating agency Crisil said on Tuesday. However, the most affected MSMEs and retail segments are expected to experience a larger increase in NPAs and stressed assets.

Even though MSMEs have benefited from the ECLGS program, which was recently expanded in terms of limit and duration, the sector is expected to experience a deterioration in asset quality and would also need restructuring to overcome cash flow issues, has declared Crisil. Restructuring is likely to be highest for the MSME segment – at 4-5 percent of the loan portfolio which would lead to distressed assets growth of 17-18 percent by year-end , up from about 14 percent the previous year. Gross NPAs were around 10% in the MSME category in FY2020 and are expected to be around 12% by March 2021.

“MSMEs have always been affected by problems in the past. They were affected during Covid for reasons such that many large companies (which they serve) also struggled to grow. However, as the economy recovers further with assistance from the RBI and the government, things are expected to improve for MSMEs in the medium term up to about a year, when there could be problems. short term. Many of them (MSMEs) should be able to break even and recover by March, ”VG Kannan, former managing director of the Association of Indian Banks, told Financial Express Online.

In September, the government extended the ECLGS until March 31, 2022, or until guarantees for the overall cap of Rs 4.5 lakh crore were issued, whichever came first. As of September 24, 2021, sanctioned loans had exceeded Rs 2.86 lakh crore under the ECLGS program, and of the total guarantees issued, around 95% were for sanctioned loans to MSME, the finance ministry said in his press release. The last disbursement date under the mechanism has also been extended to June 30, 2022.

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“The retail and MSME segments, which together make up about 40% of bank lending, are expected to see an increase in APNs and stressed assets this time around. Stressed assets in these segments are expected to grow to 4-5% and 17-18%, respectively, by year-end. The numbers would have been even higher without the write-offs, mainly in the unsecured segment, ”said Krishnan Sitaraman, Senior Director and Deputy Director of Ratings, Crisil Ratings.

In terms of restructuring MSME loan accounts by public sector banks (PSBs), the restructured accounts had increased by 2.1 times from 619,562 accounts involving Rs 22,650 crore as of January 31, 2020 to 13.06 lakh accounts involving Rs 55,333 crore in the month of June. 26, 2021. The data was shared by MSME Minister Narayan Rane in Lok Sabha in July this year. Last year’s data was shared by former MoS Anurag Thakur Ministry of Finance in Rajya Sabha in March 2020.

In order to alleviate the stress of Covid among MSMEs, the Reserve Bank of India (RBI) in June this year extended the scope of the restructuring facility for existing MSME loans from Rs 25 crore earlier to Rs 50 crore without downgrading the asset classification until September 30, 2021. On the other hand, the retail segment, which has seen relatively stable development over the past decade, has been withered by the pandemic, borrowers employees and the self-employed facing significant income issues and higher medical expenses, especially in the second wave, the rating agency added.