India MSME Financing Market 2020

Market Reports on India Provides the Trending Market Research Report “MSME Financing Market in India 2020under Financial Services Category. The report offers a collection of superior market research, market analysis, competitive intelligence and Market reports.

Micro, small and medium enterprises (MSMEs) play a pivotal role in the Indian economy. About 63.38 Mn enterprises operational in various industries have provided employment to more than 111 Mn people. The MSME sector accounts for 30% of the country’s GDP, which is likely to touch 50% in 2025. The industry's financing needs depend on the nature, size, customer segments and stage of development of the different businesses. Financial institutions have limited their lending exposure to the Indian MSME industry due to the high cost of service, small ticket size of loans and limited ability of MSMEs to offer immovable collaterals.

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As of 2019, the overall addressable demand for external credit was ~INR 41.64 Tn, while the total supply of fund stood at INR 13.54 Tn.
Therefore, the credit gap in the MSME industry accounted for ~INR 28.10 Tn in 2019.

Debt demand of the MSME sector in India:
The consolidated debt demand (both short-term and long-term finance) by Indian MSMEs accounted for ~99.39 Tn in 2019. Microenterprise debt demand accounted for INR 13.32 Tn, small enterprise accounted for INR 24.57 Tn, and medium enterprise accounted for INR 3.75 Tn of the total debt demand in the industry. Medium and small firms being more formalized in operations are better at securing collaterals with NBFCs and banks than micro-enterprises.

Credit supply to the MSME sector in India:
The overall credit supply, including both the formal and the informal sectors, is worth INR 86.08 Tn. The formal and the informal sectors contribute ~INR 13.54 Tn and INR 72.54 Tn, respectively to the overall credit supply. Banking and other financial institutions account for ~INR 11.68 Tn of the overall formal finance supply to the Indian MSME industry.

Credit gap in the MSME sector in India:
The overall credit gap is estimated to be ~INR 28.10 Tn, which can be attributed to underserved micro and small units. Further, lack of awareness among entrepreneurs about the various loan products and lack of proper documentation have considerably reduced the supply of debt.

Impact of COVID-19:
Small businesses are the most vulnerable to an unexpected crisis like COVID-19 because of their size, scale of business operation and limited financial management resources. However, the government has announced several policy measures to minimize the losses.

The announcement of a targeted long-term repo operation (TLTRO) of INR 500 Bn, a grant of INR 3 Tn collateral-free automatic loans, INR 200 Bn subordinated debt to stressed MSMEs, and a complete ban on global tenders for procurement of goods and services for up to INR 2 Bn are a few of the crucial policy mandates.

Companies covered:
• Axis Bank of India
• Bajaj Finserv Limited
• Central Bank of India
• Federal Bank Limited
• HDFC Bank Limited
• ICICI Limited
• Kotak Mahindra Bank Limited
• State Bank of India
• Union Bank of India
• Utkarsh Micro Finance Bank

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