Banks loaned Rs 50,535 crore to stressed MSMEs during March 2020-February 2021 amid concerns about rising bad loans, shows RBI report

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As per RBI, Rs 71,431 crore of MSME loans were restructured by public and private banks since 2019 under three schemes, with public banks restructuring almost 80 percent of these.

Public sector banks restructured Rs 56,886 crores of MSME loans (79.61 percent of total MSME loans restructured), while private banks restructured Rs 14,565 crore (20.39 percent of total), the report showed.

Across all loan categories including corporate, retail, other loans, MSMEs accounted for 1.7 percent of the total restructured advances across all scheduled commercial banks as of March 2021, data from the report showed.

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"While PSBs have actively resorted to restructuring under all the schemes, participation by PVBs was significant only in the COVID-19 restructuring scheme offered in August 2020," RBI said.

Despite the restructuring, however, stress in the MSME portfolio of PSBs remains high. Boosted by ECLGS disbursements to eligible categories, net credit flow to stressed MSMEs during March 2020-February 2021 rose to Rs 50,535 crore with the shares of public sector banks and private banks at 54 per cent and 35 percent, respectively.

RBI warned that the growth in credit to the high-risk segment could have significant implications following disruptions from the second COVID wave. "Given the elevated level of debt of the stressed cohort, the implications of business disruptions following the resurgence of the pandemic could be significant," RBI said.

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The non-performing assets (NPAs) in the MSME segment remained high at 15.9 percent as of March 2021 for public sector banks, and at 3.6 percent for private banks, data from RBI showed. "Going forward, close monitoring on asset quality of MSME and retail portfolios of banks is warranted," RBI said in the report.

Both the government and RBI announced a slew of measures to aid MSMEs amid the pandemic, including additional government guaranteed loans, restructuring facilities, incentives for banks to lend more to the segment.

Of Rs 108.60 lakh crore of outstanding bank credit as of April end, bank credit to MSMEs stood at Rs 5.15 lakh crore, higher by over 12.5 percent from last year.

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