With increased lending, credit flow by NFBCs to the micro, small and medium enterprises (MSMEs) is expected to grow at 12-14% in next five years, an ICRA report said. As on March 2017, credit to MSMEs stood at Rs 16 lakh crore, according to the report.
According to study report prepared by ICRA, it is expected that the NBFC and housing finance companies will expand their lending base by 20-21% compounded annual growth rate (CAGR) in this space during the period, while bank credit to the MSME segment, which accounted for about 84% of total MSME credit is estimated to grow at lower CAGR of 9-11%.
Commenting over the numbers, rating agency’s Assistant Vice President and Sector Head, A M Karthik said that since Non-banks have a niche positioning, differentiated product offering, good market knowledge and large unmet demand gives them an additional advantage to grow at a healthy rate as compared to banks.
“Non-banks share in the MSME credit pie should expand to 22-23% by March 2022 compared to 16% in March 2017”, he added.
Further, the report mentioned that the due to expected sluggish nature of large corporate in the direction of providing credit to MSMEs for coming next 2 years, the bank credit to MSME is expected to be around 9-11% with public sector banks growing at 7-9% and private banks at 16-18%.
The report also highlighted that the Non-Banking NPA stood at about 3% as on date while Banking NPAs in the MSME segment stood high at around 8.4% in March 2017.
The report said in-spite of the fact of moderate seasoning of the portfolio; non-banks have a more flexible and customized credit assessment for the MSME segment and also moving steadily to lower ticket loans because of asset quality pressure in the large ticket loans and better returns in the smaller ticket loan categories.