A recent report from TransUnion CIBIL and Small Industries Development Bank of India has unveiled a significant uptick in MSME loan origination volumes to Micro, Small, and Medium-sized Enterprises, registering a notable 20% year-on-year growth in the July-September period of 2023. This surge is attributed to a buoyant economic environment driving increased lending activities.
Lending Confidence Boosted by Data and Digital Infrastructure
The report underscores the pivotal role played by enriched and timely credit data coupled with the swift adoption of digital lending infrastructure in bolstering lender confidence. Notably, origination volumes to micro and small enterprises experienced substantial growth rates of 28% and 7% respectively, while volumes to medium-sized enterprises witnessed a modest decline of 8% year-on-year.
Sectoral Distribution and Regional Contributions
In terms of value, originations to the manufacturing and trade sector collectively accounted for nearly 65% of both volume and value. Furthermore, the report highlights that 46% of MSME originations hailed from semi-urban and rural regions, with a significant portion—46%—attributed to the new-to-credit segment.
Geographic Insights and Enquiry Volumes
Geographically, states such as Maharashtra, Gujarat, Delhi, Tamil Nadu, and Uttar Pradesh emerged as key contributors, collectively representing 47.2% of the origination value. Enquiry volumes mirrored this growth trajectory, soaring by 29% year-on-year in the September quarter, buoyed by robust economic activities.
While private banks and non-banking financial companies (NBFCs) witnessed a surge in MSME loan origination, state-owned banks observed a gradual decline. Notably, NBFCs exhibited a remarkable increase in originations across all segments—micro, small, and medium enterprises—reflecting a shifting landscape in lending dynamics.
Also read: Business Loans 2.0: Transformative Trends in MSME Financing
Stability Amid Growth: Managing Delinquency
Interestingly, the report highlights that the low and medium-risk borrower segment accounted for over 75% of MSME loan originations, signaling a robust credit environment. Despite the surge in loan originations, delinquency levels remained stable, with overall balance-level delinquencies improving to a record low of 2.3% during July-September.
This report underscores the resilience of MSMEs amid evolving economic landscapes, with robust lending activities poised to fuel their growth trajectory and contribute significantly to India’s economic resurgence.