PCA-PSBs’ in­cre­men­tal exposure to MSMEs up by 166%

Banking Frontiers - - Research Note - Msme Credit -

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.

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