India’s public sector banks (PSBs) have been seeing a gentle enchancment of their MSME mortgage ebook – or loans given to Micro, Small, and Medium Enterprises – though credit score prolonged to the smallest of those companies has not witnessed a discount in stress on the similar charge, knowledge shared by the finance ministry with the Parliament on Tuesday confirmed.
Responding to a written query within the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary mentioned that the gross non-performing asset (NPA) ratio of PSBs’ MSME loans had declined to six.18 per cent as on the finish of 2024-25 from 7.99 per cent a 12 months in the past and 12.8 per cent on the finish of March 2022.
The autumn within the gross NPA ratio was because of each, a rise within the loans prolonged to MSMEs in addition to a fall within the absolute quantity of dangerous loans. The gross NPA ratio is calculated by dividing the quantum of loans gone dangerous – loans that aren’t being paid again – by the overall quantity of loans excellent. For example, loans given by state-owned banks to MSMEs stood at Rs 13.07 lakh crore as on March 31, up 11.3 per cent year-on-year. On the similar time, the worth of those loans that had change into non-performing – or weren’t being repaid – was down 14 per cent from a 12 months in the past at Rs 80,749 crore.
Whereas absolutely the quantity of PSBs’ dangerous loans inside the MSME sector is down 22 per cent in comparison with March 2023, the decline has primarily been pushed by small and medium enterprises. As on March 31, dangerous loans to small enterprises stood at Rs 19,677 crore, down 28 per cent year-on-year and 39 per cent from March 2023. For medium-sized enterprises, PSBs’ dangerous loans stood at Rs 8,553 crore as on the finish of the final monetary 12 months, down 30 per cent year-on-year and 46 per cent in comparison with two years in the past.
Nonetheless, the decline in NPAs for micro enterprises has been significantly smaller. This can be a fear because the quantum of dangerous loans amongst micro enterprises is way greater. As per the info, PSBs’ dangerous loans to micro enterprises stood at Rs 52,519 crore as on the finish of 2024-25, down 3 per cent year-on-year and seven per cent in comparison with March 2023.
“…the incidence of NPAs in lending by banks, inter alia within the MSME sector, is attributable to quite a lot of components, which embody total efficiency of the borrowing entity, macroeconomic circumstances, sectoral points, world enterprise atmosphere, and so on,” Chaudhary mentioned in his response on Tuesday.
Lending to micro enterprises has been an issue for the complete business, however notably for state-owned banks. The Reserve Financial institution of India (RBI) final month mentioned in its most up-to-date Monetary Stability Report that credit score to those micro enterprises, which fashioned 49 per cent of whole MSME credit score, noticed weaker incremental development in 2024-25 in comparison with small and medium companies.
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“By way of quantity excellent, the share of sub-prime debtors within the MSME portfolio of the SCBs (scheduled industrial banks) has decreased from 33.5 per cent in June 2022 to 23.3 per cent in March 2025. PSBs, nevertheless, had a better share of sub-prime debtors of their MSME portfolio in comparison with PVBs (personal banks) and NBFCs (non-banking monetary firms),” the RBI had mentioned.
A sub-prime borrower is one who’s seen as a threat because of a non-existent or poor track-record of paying again loans.
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