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MSME Credit Health Index Notches Higher for Growth as well as Strength, backed by ECLGS Infusion

 The latest MSME Credit Health Index indicates that MSME credit growth has accelerated in the quarter ending September 2020 as compared to the quarter ending in June 2020. The overall Growth Index stood at 114 in September, a three-point increase from 111 in June while the overall Strength Index also improved to 89 from 83 over the same period.

In order to provide a reliable measure and benchmark of the growth and strength of the MSME sector in India, TransUnion CIBIL, in partnership with Ministry of Statistics & Programme Implementation (MoSPI), launched the MSME Credit Health Index in November 2020.

The MSME Credit Health Index is built using credit data submitted by lending institutions to TransUnion CIBIL.

The Index measures the credit health of India’s MSME industry on two parameters: Growth and Strength. Growth is measured by plotting the increase/decrease in exposure value (outstanding balances) over time, and strength is measured by the increase/decrease in credit risk in terms of non-performing assets (NPA).

Both the growth and strength indices follow the principle of the higher the better – i.e. an increasing Growth Index indicates improvement in credit growth; and an increasing Strength Index implies better asset quality and therefore denotes an improvement in the structural strength of the sector.

The growth of MSME credit (YoY increase in credit exposure) has picked up since June 2020, possibly owing to significant uptake of Government schemes, such as the ECLGS that was aimed at helping the sector bounce back from the impact of the global COVID-19 pandemic and ensuing lockdown.

Explaining these insights, the MD and CEO of TransUnion CIBIL- Mr. Rajesh Kumar said, “The ECLGS infusion has been a very visionary and timely policy intervention that is proving it’s benefits in both the short as well as long term. As MSMEs now have access to much needed financial support, they are able to scale their businesses which had experienced catastrophic lows post pandemic and resulting lockdowns. While PSBs took the initial lead in driving credit supply to MSMEs, private banks and NBFCs have also accelerated their lending to MSME’s in recent quarters.”

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