'Small biz credit demand back to pre-COVID levels, thanks to govt scheme and non-metros'

PSBs are the leading drivers of this resurgence, Cibils managing director and chief executive Rajesh Kumar said.MSME credit disbursals in metro cities were most impacted during April and May 2020, but bounced back in June 2020 after the ECLGS implementation, with non-metro locations leading the growth in loan originations.

Credit demand by small businesses is back to pre-COVID-19 levels on the back of an emergency credit guarantee scheme launched by the government, a report said on Thursday.

A bulk of the credit demand from the micro, small and medium enterprises (MSME) is coming from existing borrowers and from non-metro cities, the report by credit information company Transunion Cibil and state-owned Sidbi said.

Public sector banks (PSBs) are emerging as the leading contributors to resurgence in MSME credit growth, and downgrades are seen in sectors dependent on consumer discretionary spends and the micro loans segment, it said.

The MSME segment's credit exposure stood at Rs 19.09 lakh crore as of September 2020, showing a year-on-year growth of 5.7 per cent and the growth is across all the sub-segments of MSME lending, it said.

The government's Emergency Credit Line Guarantee Scheme (ECLGS) alone helped in commercial credit enquiries surging 58 per cent year-on-year in June 2020 and stabilised toward the end of the year at 13 per cent rise as of December, which is similar to pre-COVID-19 growth levels, the report said.

"The resurgence in MSME credit growth, which is back at pre-pandemic levels, is a very promising indicator of economic recovery in our markets. PSBs are the leading drivers of this resurgence," Cibil's managing director and chief executive Rajesh Kumar said.

MSME credit disbursals in metro cities were most impacted during April and May 2020, but bounced back in June 2020 after the ECLGS implementation, with non-metro locations leading the growth in loan originations. From an asset quality perspective, the report said default rates are stable at 12.1 per cent on the back of an acceleration in credit supply.

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