Nothing alarming about rise in MSME bad loans: RBI

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The Reserve Bank on Friday allayed the fears of lenders about the rising delinquency levels among small business loan borrowers, saying the numbers are not alarming yet.

The government and the central bank push to support MSMEs during the pandemic through credit measures like the emergency credit line guarantee scheme (ESLGS) saw lending to them jumping to Rs 9.5 lakh crore in the pandemic-hit FY21 from Rs 6.8 lakh crore in FY20, while the asset quality deteriorated to 12.6% as of March 2021 from 12% in December 2020.

RBI Deputy Governor Mukesh Jain said there is no crisis now on this front, as the stress level among small business borrowers is not very high, even though slippages and loan restructuring are rising of late.

The situation is not very bad as many accounts are going in for restructuring under the Covid package version 2 announced in May, which allowed crisis-ridden borrowers to opt for up to two years of the moratorium, he said. Yes, there is a visible increase in slippages among MSME borrowers, but the quantum of slippages has not reached an alarming level, Jain said.

We are constantly monitoring all the regulated entities, particularly banks and large NBFCs to check their asset quality. Our stress tests also prove that there is nothing alarming as of now, he added.