The report is a quarterly analysis based on the TransUnion CIBIL Commercial Bureau data, which has over 7 million live business entities ranging from proprietorship and partnership firms to publicly listed entities. The credit data is comprehensive given that it covers exposure and performance details from banks, non-bank finance companies, housing finance companies, cooperative banks, regional rural banks and other regulated lenders.
As per the report, aggregate MSME lending (both entities and individuals) has expanded rapidly over the last five years. The total balance outstanding has increased from Rs.10.4 trillion in 2013, at a compounded annual growth rate (CAGR) of 19.3%. The growth in aggregate lending growth has been powered by a 15.7% CAGR of lending to entities and 26.1% CAGR of lending to individuals.
As a proportion of GDP, MSME lending has increased by around 400 basis points (bps) to 13.6% in 2018 from 9.6% in 2013. The rapid increase in lending intensity has been driven by a 130 bps and 260 bps improvement in funding to entities and individuals, respectively. It is noteworthy that MSME lending – as measured by MSME loans outstanding divided by MSME gross value added – has moved up from 32.2% in 2013 to 47.6% in 2018 – a landmark increase of 15.4 percentage points.
But what's pertinent to note is that public sector banks (PSBs) are fast falling out of favour with their share in MSME lending (both entities and individual segments) falling from 68% to 46% in five years. The gap between the PSBs and private lenders was a significant 37% in 2013. But cut to 2018 and the private lenders have overtaken PSBs with lead of 8%. Going forward, PSBs may be able to claw back some consolatory share since NBFCs won’t be able to sustain their growth given funding constraints.