PCA-PSBs’ incremental exposure to MSMEs up by 166%
The relative share of public sector banks under PCA in exposures below Rs50 million segment has increased in FY 2017-18 as compared to FY 2016- 17, ie, during the period when PCA restrictions were imposed for exposures beyond a threshold. However, since such thresholds were generally well above Rs50 million, expansion of credit where aggregate exposure is less than `50 million is therefore not constrained by supervisory restrictions. In terms of absolute amount, incremental exposure of these banks to this segment increased by about 166% from `226.80 billion to `602.80 billion
between FY 2016- 17 and FY 2017-18. Such sharp increase may require examination of possible dilution of credit standards further and additions to supervisory strategy for PCA banks.
For banks under PCA, 4.07% of the fresh exposure / renewals up to September 2016 turned NPA by the end of September 2016. Worryingly, other public sector banks have also shown an increased conversion rate in FY 2017-18 amidst across the board improvement.