msme credit health index - transunion cibil

MSME CREDIT HEALTH INDEXSECOND EDITION | FEBRUARY 2021

CONTENTS

Quotes 02

Background 03

Methodology 04

Key Assumptions 05

Index Results 06

- Overall Index 06

- Index by MSME Size 07

- Index by Lender Category 08

- Index by State 10

FAQs 11

Annexure 13

Contact 15

TransUnion CIBIL is committed in providing insights and solutions

to support the economic revival of the country and with the launch

of the MSME Credit Health Index we further reassert our

commitment by introducing a reliable, objective and sharp indicator

of the strength, growth and stability of the MSME sector. The Index

is available at national level and granularly across MSME segments,

lender categories and geographies. The objective of the Index is to

support MSMEs, lenders and policy makers with an efficient tool to

monitor and benchmark the movement in the micro-ecosystems of

the MSME sector. The ongoing monitoring of the index will provide

insights for aligning strategies and policies towards efficient

implementation of funds and resources for sustained development

of the MSME sector and thereby the socio-economic growth.

02MSME Credit Health Index

MD and CEO ofTransUnion CIBIL

Shri Rajesh Kumar


TransUnion CIBIL has partnered with Ministry of Statistics & Programme Implementation (MoSPI) to build and publish quarterly MSME Credit Health Index to help measure growth and strength of the MSME sector.

Currently, various Government schemes exist to boost growth in the MSME sector. A recent example is the collateral free Emergency Credit Line Guarantee Scheme (ECLGS) announced in May 2020 to help small businesses tide over the COVID-19 pandemic crisis. However, there is a scope of further enhancing the information and insights available to policy makers, lenders and other stakeholders with regard to the overall progress of the sector and the areas where they need to focus their attention on. The MSME Credit Health Index is an attempt to provide data driven insights on MSMEs.

The MSME Credit Health Index is built using credit data as submitted by Credit Lending Institutions (CLIs) to TransUnion CIBIL. The Index looks at two critical aspects of the credit health of the MSME industry – Growth and Strength. Growth is measured by increase in exposure value over time, and strength is measured by decreasing risk in terms of Non-Performing Assets (NPA). March 2018 has been taken as a fixed benchmark to compute the Index values.

The MSME Credit Health Index will provide the Government, policy makers, lenders and other stakeholders, insights and analysis on various aspects of health of the MSME industry, thus enabling them to make better policy and business decisions with respect to MSME lending. The ease of access of such comprehensive information with a single MSME Credit Health Index will facilitate better risk management and inclusion of MSMEs in Indian banking and financial system. The Index will also help to educate general public about the credit health of MSME sector and thereby instill confidence.

BACKGROUND

MSME CreditHealth Index -

Growth

MSME CreditHealth Index -

Strength

Total Exposure NPA %

MSME Size

Lender Category

State

04

• Two separate indices are computed measuring Growth and Strength for MSME sector.

• Entire MSME industry data starting March 2018 to September 2020 has been considered for Scomputation of the index.

• Growth is measured by total exposure (outstanding balances) and Strength is measured by NPA % i.e. balances in 90 or more days past due.

• Both the growth and strength index follow the principle of higher the better – an increasing Growth Index indicates improvement in credit growth; and an increasing Strength Index implies better asset quality.

• March 2018 has been taken as a fixed benchmark for computing the index and sub-index.

• Metric values are scaled using a base of 100.

• The index values will be available at an overall MSME level, by size of MSMEs, by lender category and by State.

• Sub-indices are calibrated separately with their own benchmarks. Eg: for Micro Segment Index, the base will be all Micro MSMEs and will allow comparison across time and geography

• The index will be refreshed every quarter.

Additionally, the following considerations will be explored further and may be incorporated in future versions of the Index:

• Incorporating multiple metrics into each index to capture different aspects of Growth and Strength respectively

• Seasonality adjustments

• Different industries’ aspects within MSMEs

MSME Credit Health Index MSME Credit Health Index

METHODOLOGY

Data Source: Latest data submitted by CLIs to TransUnion CIBIL.

MSME Definition: As per the MSMED Act, MSMEs are defined basis investment in plant and machinery or equipment (INV) and annual turnover (TO) as follows:

The above definition has been translated into a definition involving credit exposure as per the following analysis:

To compare the correlation between the turnover and debt of any entity, sample of entities were selected from CMIE-Prowess IQ database. Data on total turnover and total borrowings for the period of December 2018 was gathered for this sample of entities. Total borrowings included borrowing from banks, financial institutions, and other borrowings - secured and unsecured borrowing.

It was observed that from the sample of 2,296 borrowers falling in the turnover bucket u p to INR 250 crores, 96% of entities also fell under MSME segment with aggregate exposure up to INR 50 crores. Study also suggests that Median of total borrowings across Micro, Small and Medium segment is INR 24 lakhs, INR 3.96 crores and INR 19.03 crores respectively. Hence, it seen that the median of total debt for all the MSME entity segments are within the range of MEMEs defined based on aggregate credit exposure/total borrowing as given below:

Micro: Exposure up to INR 1 Crore

Small: Exposure between INR 1 Crore and INR 10 Crores

Medium: Exposure between INR 10 Crores and INR 50 Crores

Given the constraints around availability of turnover data in the bureau and based on the findings mentioned above, it was reasonably concluded that exposure may be effectively used to classify MSME borrowers. Accordingly, the above definition of MSME in terms of credit exposure has been used for the development of this Index.

05

Micro INV <= INR 1 crore; TO <= INR 5 crores

Small INV <= INR 10 crores; TO <= INR 50 crores

Medium INV <= INR 50 crores; TO <= INR 250 crores

MSME Credit Health Index

KEY ASSUMPTIONS


Overall IndexMSME credit growth (YoY increase in credit exposure) has picked up since June 2020, possibly owing to significant uptake of Government schemes, such as ECLGS, aimed at helping the sector bounce back from the impact of the global pandemic and ensuing lockdown.

As noted above, there has been a boost in growth possibly owing to ECLGS offtake in the last two quarters. The spike in Strength Index is partly due to the increased base effect. Furthermore, actual NPA rates observed are subject to change as regulatory /legal guidelines emerge going forward.

120

110

100

90

80

Inde

x V

alue

Base

100 100

104107

111109 110 111

108111

114

Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

Growth Index

110

100

90

80

Inde

x V

alue

Base

100

92 92 91

97

89

86 86

90

83

89

Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

Strength Index

INDEX RESULTS

Dec-19 Mar-20 Jun-20 Sep-20


Index by MSME Size

Similar to the overall index, we notice an uptick in growth across all MSME segments in the past two quarters, possibly due to ECLGS.

A look at Strength Index by MSME size reveals that the Index values across all segments have reached the same level in June 2020, while following a different trajectory in the last two years. Similar to what we observed in the overall graph, the index increase in September 2020 may not be reflective of an actual reduction of NPAs. This true direction of the index will become clearer over the next few months as regulatory/legal guidelines emerge.

130

120

110

100

90

80

Inde

x V

alue

Base Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

Growth Index by MSME Size

Micro

Small

Medium

110

100

90

80

Inde

x V

alue


Strength Index by MSME Size

Micro

Small

Medium


Index by Lender Category

At a lender category level, we observe that Private Banks (PVTs) and Public Sector Banks (PSBs) Sector banks have seen a boost in growth in the last two quarters, possibly owing to ECLGS. The same looks comparatively muted for Non-Banking Financial Companies (NBFCs).

Absolute credit disbursements datashow that PSBs have emerged as the leading MSME lender group for the period Jun’20 to Sep’20. Disbursals by Private Banks were also impacted during the lockdown however they are back to Pre-Covid levels.

140

130

120

110

100

90Base Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

Growth Index by Lender Category

PSB

PVT

NBFC

Inde

x V

alue

900800700600500400300200100

0

# L

oans

(’0

00

)

Jun

-19

Sep

-19

Dec

-19

Mar

-20

Jun

-20

Sep

-20

Loans Sanctioned Volume by Lender Type

NBFC

PVT

PSB


120

110

100

90

80

70

60

50

40

Strength Index by Lender Category

PSB

PVT

NBFC

Inde

x V

alue

As seen in the overall strength index, there is a slight increase in the strength index across all lender categories, which is due to base effect and may not be reflective of actual improvement in portfolio.

As far as absolute values are concerned, PSBs continue to have much higher NPAs as compared to Private Banks and NBFCs.

250%

200%

150%

100%

50%

0%

-50%

-100%

-150%

YoY Growth Rate of Originations of MSME loans by amount for lendergroups

PSB

PVT

NBFCJan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20


Base Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Mar-20 Jun-20 Sep-20Dec-19

% B

alan

ces

in N

PA

20%

15%

10%

5%

0%

NPA Rate by Lender Category

PSB

PVT

NBFC


Base 100 100 100 100 100 100

Jun-18 101 90 100 90 102 96

Sep-18 107 83 104 90 108 95

Dec-18 111 82 106 90 110 94

Mar-19 116 86 109 96 114 96

Jun-19 114 80 107 89 114 90

Sep-19 115 77 107 84 113 85

Dec-19 115 76 109 82 116 87

Mar-20 110 96 103 82 111 88

Jun-20 116 72 108 79 115 84

Sep-20 120 76 109 82 117 89

Period Tamil Nadu

Growth Strength Growth Strength Growth Strength

Maharashtra Gujarat

Index by State

Among states with substantial MSME portfolio by exposure, it is observed that Tamil Nadu, Maharashtra and Gujarat have shown higher growth momentum. The state of Gujarat also reflects relatively better strength. Details on Indices at State level are given in Annexure.

Other notable mentions:

•Uttar Pradesh, which is in the top 10 states by exposure, has seen sustained growth momentum in the last couple of quarters

•Among the top 10 states with respect to exposure, the southern states have shown more growth than the northern states cumulatively with respect to Micro loans

•West Bengal and Telengana, also in the top 10, have stable Strength Indices along with steadily increasing Growth Indices


DOES THE INDEX INCLUDE ALL MSMES IN INDIA? The MSME Credit Health Index has been built using credit data as submitted by lending institutions to TransUnion CIBIL. Hence, it includes MSMEs who have availed of formal credit. As of September 2020, it includes data of close to 60 lakh MSMEs which have a live credit facility from any lending institution in India.

ARE ALL INDUSTRIES REPRESENTED IN THE INDEX? The data considered for this index captures the universe of MSMEs who have availed formal credit from any lending institution. Therefore, the Index has a good representation across all industries. However, no analysis or sampling has been done to align the representation of any particular industry in credit data to that of overall MSME industry.

HOW WAS THE BENCHMARK SELECTED?March 2018 is selected as base to reflect a period that is “Normal” and as a data point that is closer to the beginning of the series.

CAN STATE LEVEL SUB-INDICES BE COMPARED TO EACH OTHER?Each sub-index, e.g. for each state and for each size of MSME have their own benchmarks. Hence, they cannot be compared against each other. E.g. Uttar Pradesh Growth Index may not be directly comparable to Gujarat Growth Index. However, the growth momentum or change in strength as compared to the benchmark may be comparable.

HOW WILL THIS INDEX BE RELEVANT IN THE CURRENT SCENARIO?MSME credit had been going through a tough time even pre-COVID, but various government schemes like ECLGS have set the stage to boost MSME sector. The MSME Credit Health Index will be one such tool which will enable policy makers and market participants to better understand the growth and strength of the sector from a lending perspective and hence equip them to make better decisions.

WHAT ARE THE ENHANCEMENTS EXPECTED IN THIS INDEX IN THE FUTURE?Going forward, there will be further studies done to make the Index more robust and to build more sub-indices across other dimensions like Industry of the MSME as an example..

(1)

(2)

(3)

(4)

(5)

(6)

FAQS


AT WHAT FREQUENCY WILL THERE BE A REVISION IN THE INDEX?The Index will be revised at a quarterly interval. Along with publishing the Index for the latest quarter, revision will be done for the last version of the Index (previous quarter) as well, in case there is updated information pertaining to the said quarter available in the bureau.

DOES THE INDEX CONSIDER ONLY NEW CREDIT OFFTAKE OR TOTAL EXPOSURE?The current version of the Index uses total exposure or outstanding balance of MSMEs at the point in time. New credit offtake was not included given the current reporting format followed by lending institutions

DO THE SEPTEMBER 2020 INDEX VALUES FACTOR FOR MORATORIUM AVAILED BY MSMES?TransUnion CIBIL DOES NOT get information on moratorium availed by borrowers from CLIs. The index values for September 2020 are derived basis outstanding balances and performance history as reported by CLIs.

(5)

(6)

(7)

12


Jun-20

100 103 106 113 119 126 126 127 124 136 145

100 102 151 149 172 143 154 180 150 170 187

100 102 104 110 117 116 115 115 115 116 121

100 89 91 94 101 92 86 84 79 73 80

100 101 104 106 111 104 106 110 100 106 108

100 94 97 96 89 85 93 94 125 126 124

100 99 102 103 107 106 107 107 103 111 117

100 93 92 95 103 101 97 94 115 105 115

100 101 106 110 115 113 114 118 119 122 130

100 95 96 94 114 98 97 106 107 110 123

100 98 100 102 105 103 102 101 98 102 106

100 93 96 94 94 87 92 89 95 99 102

100 99 103 111 117 113 112 118 120 119 123

100 91 83 84 92 81 73 75 75 71 75

100 100 106 106 107 104 105 102 100 104 102

100 97 96 90 104 102 104 87 75 95 94

100 98 104 106 112 113 112 116 106 116 112

100 96 100 88 97 90 78 83 78 93 88

100 99 103 104 107 104 106 107 103 103 106

100 94 96 97 98 90 88 88 84 83 86

100 100 101 102 103 100 100 98 90 94 96

100 90 102 100 117 109 112 112 106 102 109

100 102 108 110 114 114 113 116 111 115 117

100 96 95 94 96 90 85 87 88 84 89

100 100 104 106 110 107 109 110 108 111 117

100 96 100 99 108 96 91 95 91 84 86

100 102 105 105 105 105 107 104 104 107 112

100 97 97 82 92 93 94 99 93 105 118

100 103 109 112 116 121 122 121 121 126 134

100 101 104 103 99 104 74 63 61 67 73

100 99 105 106 110 107 108 110 110 114 120

100 94 98 98 114 107 105 114 113 111 125

100 101 103 107 111 110 109 110 106 111 114

100 90 88 85 90 82 79 79 76 71 79

Andaman & Nicobar Islands

Andhra Pradesh

Arunachal Pradesh

Assam

Bihar

Chandigarh

Chattisgarh

Dadra & Nagar Haveli

Daman & Diu

Delhi

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu & Kashmir

Jharkhand

Karnataka

State Base Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Index for every State

ANNEXUREGrowth Index Strength Index


100 102 106 109 114 111 113 112 109 116 122

100 89 83 85 92 82 80 79 78 74 80

100 95 118 164 162 150 170 121 92 143 157

100 21 118 55 162 100 113 243 184 165 178

100 100 102 107 112 110 109 113 112 115 120

100 89 87 84 90 80 76 78 77 74 80

100 100 104 106 109 107 107 109 103 108 109

100 90 90 90 96 89 84 82 82 79 82

100 100 104 103 114 115 114 116 105 124 130

100 89 84 96 100 87 87 96 102 130 83

100 102 103 101 107 104 102 102 87 98 102

100 98 103 102 104 93 96 97 145 160 161

100 107 114 102 105 105 102 99 91 105 113

100 101 75 94 108 106 105 103 121 102 110

100 100 99 101 107 105 108 107 105 108 110

100 95 92 92 95 87 89 83 90 86 91

100 100 103 106 112 111 111 114 115 116 123

100 95 98 99 109 103 102 106 105 103 112

100 99 101 104 112 109 111 111 107 111 113

100 90 90 97 99 93 92 88 101 89 103

100 99 103 102 105 102 104 103 101 103 109

100 94 95 94 97 90 88 87 86 93 101

100 101 105 107 112 111 112 114 112 115 121

100 91 90 77 89 76 73 72 69 64 67

100 102 115 113 119 117 112 103 99 93 99

100 104 76 74 85 86 85 73 75 62 65

100 101 107 111 116 114 115 115 110 116 120

100 90 83 82 86 80 77 76 96 72 76

100 103 105 108 112 111 110 114 110 114 118

100 96 96 95 105 97 97 99 97 93 101

100 100 103 103 106 103 107 105 105 104 111

100 93 93 90 96 81 86 86 92 89 102

100 101 105 108 113 112 112 113 112 114 120

100 94 97 90 100 90 88 91 88 86 95

100 105 110 113 114 114 116 118 116 117 123

100 99 100 83 98 98 98 101 90 88 102

100 99 104 104 108 106 107 108 106 107 111

100 94 97 97 102 95 92 92 101 95 102

Kerala

Lakshadweep

Madhya Pradesh

Maharashtra

Manipur

Meghalaya

Mizoram

Nagaland

Odisha

Pondicherry

Punjab

Rajasthan

Sikkim

Tamil Nadu

Telangana

Tripura

Uttar Pradesh

Uttarakhand

West Bengal

State Base Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

CONTACT DETAILS

TransUnion CIBIL Contacts

Abhay Kelkar – Vice President, Research & Consulting

[email protected]

Smeeta Basak – Joint Vice President, Head of Data Science and Analytics

[email protected]

Vipul Mahajan - Joint Vice President & Market Planner for Commercial Bureau Business

[email protected]

MoSPI Contacts

Dilip Kumar Sinha - Deputy Director General,

National Accounts Division,

National Statistical Office,

Ministry of Statistics and Programme Implementation,

[email protected]


16

About TransUnion CIBIL

India’s pioneer information and insights company, TransUnion CIBIL makes trust possible in the modern

economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely

represented in the marketplace. As a result, businesses and consumers can transact with confidence and

achieve great things. We call this Information for Good.® TransUnion CIBIL provides solutions that help

create economic opportunity, great experiences and personal empowerment for millions of people in India.

We serve the financial sector as well as MSMEs, corporate and individual consumers. Our customers in India

include banks, financial institutions, NBFCs, housing finance companies, microfinance companies and

insurance firms.

For more information visit: www.transunioncibil.com

Disclaimer

The MSME Credit Health Index Report is prepared TransUnion CIBIL Limited (TU CIBIL). By accessing and

using the Report the user acknowledges and accepts such use is subject to this disclaimer. This Report is

based on collation of information, substantially, provided by credit institutions who are members with TU

CIBIL. While TU CIBIL takes reasonable care in preparing the Report, TU CIBIL shall not be responsible for

errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions.

Further, TU CIBIL does not guarantee the adequacy or completeness of the information in the Report and/or

its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Report and

that TU CIBIL expressly disclaims all such liability. This Report is not a recommendation for rejection / denial

or acceptance of any application nor any recommendation by TU CIBIL to (i) lend or not to lend; (ii) enter into

or not to enter into any financial transaction with the concerned individual/entity. The Information contained

in the Report does not constitute advice and the user should carry out all the necessary analysis that is

prudent in its opinion before making any decisions based on the Information contained in this Report. The use

of the Report is governed by the provisions of the Credit Information Companies (Regulation) Act, 2005, the

Credit Information Companies Regulations, 2006, Credit Information Companies Rules, 2006. No part of the

Report should be copied, circulated, published without prior approvals.

© 2021 TransUnion CIBIL Limited All Rights Reserved TransUnion CIBIL Limited 19th Floor, Tower 2, One World Centre,Senapati Bapat Marg,Elphinstone Road, Maharashtra 400013.


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