Mumbai: Findings from the latest edition of the SIDBI – TransUnion CIBIL MSME Pulse Report indicate that in FY 2021, loans worth Rs 9.5 lakh crores were disbursed to MSMEs. This amount is much higher than the preceding year- FY 2020, when loans amounting to Rs 6.8 lakh crores were disbursed.

Government interventions like Emergency Credit Line Guarantee Scheme (ECLGS) under the Atmanirbhar Bharat program was the major factor in driving this significant surge in credit disbursement to MSMEs.

The total on-balance sheet commercial lending exposure in India stood at Rs 74.36 lakh crores in March ’21, with YOY growth rate of 0.6 per cent. MSME segment’s credit exposure stood at Rs 20.21 lakh crores as of March ’21, showing YOY growth rate of 6.6 per cent. This credit growth is observed across all the sub segments of MSME lending.

Credit demand sees a sharp surge post unlocks after both the pandemic waves

MSME Pulse Report analysis shows a significant surge in credit demand post unlocks after the 1st and 2nd wave of the pandemic. Followed by the initial drop in commercial credit enquires by 76 per cent during the 1st wave, they recovered rapidly backed by ECLGS intervention and have since sustained close to pre-COVID-19 levels.

March ’21 commercial credit enquiries were at 32 per cent over pre-COVID-19 levels; this strong momentum was impacted by the 2nd wave, but June ’21 again showed a sharp recovery to pre-COVID-19 levels, according to the MSME Pulse report.

“The significant surge in MSME credit demand post gradual reopening of the markets, reasserts India’s growth story. Government’s pro-growth initiatives like extending ECLGS support to the tune of Rs 4.5 lac crores, regulatory reforms like restructuring of loans and the swift implementation of these initiatives by banks & credit institutions using data analytics has fortified MSMEs. With these progressive policies and support, India’s MSME sector is set on a definite resurgence trajectory and this bodes well for the future strength and growth of our economy.”

Rajesh Kumar
Managing Director & CEO
TransUnion CIBIL

Profile of MSME borrowers getting fresh loans has changed in 2021

In order to understand the insights on the key shift in MSME lending, this edition of MSME Pulse covers an analysis of borrower profiles of entities getting funded post-COVID wave-1 compared to entities getting funded pre-COVID wave-1.

CIBIL Rank (CMR) assigns a rank to the MSME based on its credit history data on a scale of 1-10, CMR 1 being the best possible rank and CMR 10 being the riskiest rank for MSMEs.

Post-COVID-19 wave one, there’s been a reduction in new originations on high-risk MSME entities (CMR 8–10). This reduction is offset by an increase in originations in CMR 6–7, implying lenders reduction in risk appetite and the difficulty in finding good MSMEs in the range of CMR 1-5 in the current uncertain environment.

This trend is also echoed through an analysis done using TransUnion CIBIL’s Credit Vision (CV) algorithm of missed payments, which shows that finding MSMEs with an absolutely clean track record is harder. The analysis captures the payment behavior of MSMEs against their outstanding obligations.

Insights reveal that:

  • Of the MSME that were given loans in the period of January to March ’21, 29 per cent had missed more than one payment in last three months
  • Of the MSMEs that were given loans during January to March ’20, 21 per cent had missed more than one payment in the preceding three month.

“The MSME credit data speaks volumes of success of ECLGS scheme. The scheme has played a major role in 40 per cent Y-o-Y growth in disbursements to the sector, thereby reviving the business sentiments among the MSMEs. The key highlight which signals the revival is credit to new-to-bank (NTB) which has returned back to pre-COVID levels, while credit to existing-to-bank (ETB) remains buoyant. The recent additional relief measures by Government, especially in healthcare, travel and tourism, are expected to improve credit offtake in the MSME sector. Going forward, the lenders need to continuously monitor the health of credit portfolios, while sustaining credit growth to MSMEs.”

Sivasubramanian Ramann
Chairman and Managing Director

Regular portfolio monitoring based on CMR vital for controlling stability

An accelerated increase in credit balances in the recent quarters — especially in the Medium Risk and High Risk segments make the case stronger for heightened portfolio monitoring.

CreditVision (CV) algorithms like, trended utilization in credit balances for revolving credit facilities such as cash credit and overdraft loan are analyzed over a period of 12 months. These algorithms enables further disaggregation of credit bureau data, and when used in conjunction with CMR, provides a sharper risk differentiation.

Split of utilization within the CIBIL MSME Ranks (CMR) indicates the MSME entities in the highest utilization segment (>78 per cent average Utilization) of CMR 4-5 Rank borrower segment have a bad rate of 13 per cent, while the bad rate for same CMR 4-5 segment borrower reduces to 7 per cent for utilization level below 50 per cent.

Thus, using the trended utilization algorithm, it’s possible to identify pockets of stress within the good ranks, as well as segment better borrowers amongst medium-risk borrowers.

Backed by the ECLGS interventions, the MSME segment is well supported to drive business growth and economic resurgence. Banks and credit institutions must now focus on a sustained credit growth and on monitoring the health of their portfolios astutely through CMR and CreditVision ® lens to be able to implement timely interventions needed for sustained growth,” concludes Rajesh.

Suggested Read: Pune MCCIA Survey: MSME sector sees slight uptick in production levels (

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