Private lenders beat state-owned banks in disbursing govt-backed credit
Premium- A higher share of MSME clients may be behind high disbursals, say analysts
MUMBAI : Public sector banks have lagged behind their private peers in disbursing loans under the government-backed credit guarantee scheme, showed data from the National Credit Guarantee Trustee Co. Ltd cited by the Reserve Bank of India (RBI).
“Private banks showed greater proclivity than public sector banks (PSBs) for utilizing the Emergency Credit Line Guarantee Scheme (ECLGS), covering a larger number of beneficiaries," the regulator said in its Financial Stability Report.
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As of 12 November, private banks had disbursed ₹1.06 trillion of government-guaranteed loans, while their state-run rivals made ₹83,000 crore worth of loans, data showed. Non-banking financial companies (NBFCs) disbursed ₹31,000 crore, followed by foreign banks at ₹5,000 crore.
“Private banks have a higher share of micro, small and medium enterprise (MSME) customers as compared to state-owned peers, and that could be one reason for higher disbursals by the former," said Anil Gupta, vice-president and sector head (financial sector ratings) at Icra Ltd.
Gupta said another reason is that, as compared to public sector banks, private lenders have restructured fewer loans to MSMEs and perhaps have disbursed more ECGLS loans instead. “However, if you look at data, average ticket size of ECLGS loans from PSU banks is higher than their private peers," he added.
India’s small businesses were the worst hit by the pandemic, crimping their ability to repay debt. However, the impact was somewhat cushioned by schemes introduced by the government and the regulator’s forbearance on classifying loans as non-performing. That said, credit to MSMEs slowed by the end of September from March.
The decline, RBI said, was particularly noticeable in the sub- ₹25 crore ticket size across major bank groups. While aggregate MSME exposure in state-owned and private sector banks rose 1.9% from a year ago in September, loans in the sub- ₹25 crore segment grew a meagre 0.28%.
Launched on 20 May 2020, ECLGS provides 100% guarantee coverage to select borrowers, and while it was originally devised for small business borrowers with total fund-based credit outstanding of up to ₹25 crore, it now includes other segments as well. The validity of ECLGS has been extended to 31 March or till guarantees for an amount of ₹4.5 trillion are issued, and disbursement under the scheme is permitted up to 30 June 2022.
Till 12 November, banks and non-bank financiers have sanctioned loans of ₹2.82 trillion, of which ₹2.28 trillion was disbursed, it said. “An analysis of detailed disbursal data shows guarantees of value up to ₹1 crore formed 51% of aggregate guarantees and 66% of guarantees have been issued to MSMEs," RBI said.
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That apart, there is also some stress building up among small borrowers, with data showing a rise in special mention 2 (SMA-2) borrowers in September as against March. Under RBI norms, borrowers must be categorized into SMAs based on repayment delays.
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