The total balance outstanding has increased from Rs 10.4 trillion in the quarter ended December 2013 to Rs 25.2 trillion in the quarter ended December 2018. This was a compound annual growth rate (CAGR) of 19.3 per cent, powered by a 15.7 per cent CAGR of lending to entities and 26.1 per cent of business lending to individuals.
The comparatively higher rate of business lending to individuals has translated into a major shift in the composition of the MSME
lending industry in favor of individuals.
segment, where NPAs had peaked in the previous few years, is starting to see a fall in NPA ratios. While aggregate and entity NPA ratios are on the decline, NPAs in MSME
loans to individuals continue to rise.
Public sector banks (PSBs) are showing a sustained and significant decline in market share of MSME lending, especially in the commercial entities segment. The share of PSBs has declined from over two-thirds of the market in December 2013 to less than half of the market in December 2018. Private sector banks and non-banking finance companies have been able to take advantage of the rapid growth in the MSME lending
The ongoing trend of increasing formalisation, as well as financial inclusion, implies that the number of new MSMEs has been consistently increasing across geographies, said the report.