Motilal Oswal On Financial Sector - Asset Quality Remains Under Watch, MSME Credit Declines

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Motilal Oswal Report

As per the latest TransUnion CIBIL Ltd. on Micro Small and Medium Enterprise Pulse report, asset quality continued to deteriorate in the MSME segment, with the non-performing asset ratio increasing by 140 basis point YoY to 12.8% as of Q1 FY21.

However, non-banking financial companies have witnessed the most significant increase in NPAs in the segment by approximately 390 basis point YoY to 9.7%.

Currently, approximately 80%/86% of the public sector bank/private bank MSME disbursements in June 2020 were toward the super prime and prime category MSME borrowers.

However, incrementally higher inquiries were seen from high-risk category borrowers.

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