India has approximately 630 Lakh MSME corporates of which only 250 Lakh have ever been credited. While the sector continues to grow at a projected compound annual growth rate (CAGR) of 2.5 per cent, in the coming times, the approximate number of MSME corporate entities is expected to touch 750 Lakh. Out of this estimate, around 500 Lakh are expected to be NTC (New-to-Credit) MSME entities, revealed a latest joint report by TransUnion CIBIL and SIDBI.
NTC MSME entities are defined as those who open their first-ever MSME credit product. These are first-generation entrepreneurs, first time exporters and those that seek credit for expansion or technological innovations in existing businesses.
Emerging business entities that are eligible of credit can be the drivers of the next leg of MSME credit growth. Timely supply of credit to these emerging entities by customising credit products and delivery based on their requirements will empower these enterprises to manage cash flows and run their business operations smoothly.
Enabling credit access to NTC MSMEs will support financial inclusion goals while also catalysing economic growth by contributing to the GDP, increasing export share and generating large scale employment, said the report.
In Q4 FY23, NTC borrowers accounted for 56 per cent of new loan origination in the MSME lending space. Specifically within the ‘micro’ segment (less than 100 lakh), these borrowers contributed over 61 per cent of originations, the report further highlighted.
The high credit demand for commercial loans within this ‘micro’ segment, coupled with positive lender sentiment and robust demand, has propelled the growth of NTC borrowers, significantly contributing to greater financial inclusion.
Public sector banks have been the dominant lenders to NTC borrowers seeking less than Rs 50 lakh loans, while private banks leading suppliers of loans between Rs 50 lakh to 1 crore.
Credit access is available across diverse geographies enabling NTC borrowers from rural and semi-urban areas to avail loans of ticket size less than Rs 10 lakh. More than 50 per cent of NTC borrowers who avail loans less than Rs 50 lakh begin their journey with smaller-ticket size loans, the report stated.
With the advancement of digitalization and improved access to information, the turnaround time across micro loans (less than Rs 100 lakh), has significantly improved. Fastest processing time was on Rs 50 lakh and 1 crore loan segment, it added.
Ample opportunity exists towards driving deeper penetration in the segments where borrowers are seeking loans between Rs 50 lakh and Rs 1 crore. Different category lenders specialize in serving specific NTC or unserved borrowers, thereby facilitating greater credit access across various borrower segments.
