TAT for MSME Loan Processing Improves Among Lenders; NBFCs Are the Fastest: Report

There has been an increase in the turn-around times (TAT) for loan processing across all the three segments of lenders with the NBFCs being the fastest, according to TransUnion CIBIL-SIDBI joint report.

Non-Banking Finance Companies (NBFC) have consistently demonstrated lowest TAT compared to other lender categories, and their TAT has reduced from 24 days in 2016 to 18 days in 2018.

While public sector banks still have the longest TAT, they have demonstrated the maximum reduction in TAT for the MSME segment from 41 days to 31 days. Private sector bank TATs have moved from 32 days to 29 days, as per the MSME Pulse report.

The report attributed the lower NBFC TATs to higher proportion of parameterized program-based loans.

The average turnaround time (TAT) for MSME segment to take credit has improved from 29 days in 2017 to 26 days in 2018, according to a TransUnion Cibil-SIDBI joint report.

“Data shows that from 2016 to 2018, TAT has continuously improved for MSME segment underwriting. In 2016, TAT stood at 32 days. This reduced to 29 days in 2017 and reduced further to 26 days in 2018,” said the report, MSME Pulse.

TAT for the firms with upto Rs 10 lakh segment has reduced from 23 days in 2017 to 18 days and from 26 days in 2017 to 24 days in the ₹10 lakh to ₹1 crore segments.

TAT has increased from 31 days in 2017 to 32 days in the ₹1 crore to ₹10 crore segment, and from 36 days in 2017 to 37 days in the ₹10 crore to ₹25 crore segment.

The study also found not much improvement in the TAT for larger segments, because most digitization initiatives by banks are mainly focused on low ticket segments.

TAT is defined as the number of days between the date of enquiry and the date of loan sanctioned or renewal date.