MSME Credit Decline: A Shift in Lending Focus
MSME credit originations saw a 7% decline in FY25, led by lenders' reluctance to write micro-loans under Rs 1 crore. While micro-segment loans decreased by value, small and medium segments rose. Despite challenges in originations, the portfolio outstanding increased by 20.1%, with stress levels improving.
- Country:
- India
In a significant shift within the lending landscape, MSME credit originations decreased by over 7% in FY25, driven largely by lenders' hesitance to engage in micro-loans under Rs 1 crore, according to a recent report by Crif High Mark.
Although the originations by value dropped 7.4% from Rs 39.9 lakh crore in FY24 to Rs 36.9 lakh crore in FY25 due to a downturn in the micro segment, loans in the small and medium segments demonstrated robust growth. Specifically, loans within the Rs 1-50 crore range experienced notable increases, indicating a strategic pivot towards higher-value borrower segments.
While there was only a modest growth of 1.3% in active MSME loans, compared to a 23.7% rise the previous year, the overall portfolio outstanding witnessed a 20.1% increase to Rs 40.4 lakh crore. From a stress perspective, loans overdue for 91-180 days saw improvement, declining to 1.2% from 1.3% the year before, pointing towards a healthier loan portfolio.
(With inputs from agencies.)
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