MSME NPAs may rise slightly in export sectors amid global headwinds: Crisil Ratings

New Delhi [India], September 20 (ANI): Non-performing assets (NPAs) in the Micro, Small and Medium Enterprises (MSME) sector may see a marginal uptick, particularly in select export-oriented industries, amid global trade headwinds and portfolio seasoning, according to Crisil Ratings.

“MSME NPAs may witness an inch-up in select export-oriented sectors, also with seasoning; retail unsecured loans remain a monitorable,” said Crisil in a presentation during its Banking conclave 2025.

The presentation shows a significant improvement in the asset quality of the MSME sector over the past five years, with the gross Non-Performing Assets (NPA) ratio steadily declining from 8.7 per cent in March 2021 to 3.6 per cent in March 2025.

This downward trend reflects the positive impact of policy support, regulatory interventions, and recovery in economic activity post-pandemic. However, the projection for March 2026 indicates a slight reversal, with NPAs expected to inch up to between 3.7 per cent and 3.9 per cent.

The analysis comes as India’s exports to the United States fell for the third straight month in August, as steep tariff hikes by Washington continued to weigh on trade, according to the Global Trade Research Initiative (GTRI).

Exports in August dropped sharply to USD 6.7 billion, marking a 16.3 per cent fall from July. This was the steepest monthly decline of 2025. The fall came after the U.S. doubled duties on Indian goods from 25 per cent to 50 per cent on August 27. Earlier in the month, on August 7, tariffs had already risen from 10 per cent to 25 per cent, GTRI added in its analysis.

According to the information shared by the MoS Ministry, Pankaj Chaudhary, in March this year, the total advances outstanding to the MSME sector have consistently increased over the last five years.

The gross NPAs and gross NPA ratio of the MSME Sector have continuously decreased during the same period.

Further, as per the provisional data of FY 2025, i.e. till December 31, furnished by RBI, both Gross NPAs and Gross NPA ratio of the MSME Sector decline.

As of 31 March 2020, funded advances outstanding to MSMEs were about Rs 16,97,836 crore. Gross NPAs in the MSME sector stood at around Rs 1,87,255 crore, giving a gross NPA ratio of about 11 per cent.

As of March 31, 2024, funded advances had grown to about Rs 28,04,511 crore. Gross NPAs had reduced to around Rs 1,25,217 crore, bringing down the gross NPA ratio to about 4 per cent.

Provisional data for FY 2025 (up to 31 December 2024) also show that both gross NPAs and the NPA ratio for MSMEs continued to decline.

The government has implemented several comprehensive measures to reduce non-performing assets (NPAs), particularly in the MSME sector.

Key initiatives include the introduction of the Pre-Packaged Insolvency Resolution Process (PPIRP) under the Insolvency and Bankruptcy Code (IBC), aimed at providing a swift, cost-effective, and minimally disruptive resolution mechanism for stressed MSMEs.

The Reserve Bank of India (RBI) also issued the Prudential Framework for Resolution of Stressed Assets in 2019 to promote early identification and time-bound resolution of stressed accounts.

In response to the COVID-19 pandemic, relief measures such as loan moratoriums, recalculation of drawing power, and resolution frameworks 1.0 and 2.0 were introduced to support MSMEs. (ANI)

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