INDUSTRY

CRISIL sees moderate rise in gross NPAs of banks’ MSME portfolio

Gross non-performing assets (NPAs) of the banking system’s micro, small and medium enterprises (MSMEs) portfolio are likely to rise moderately to about 3.9 per cent by the end of FY26, CRISIL Ratings has said.
The rise in the dud assets will be primarily driven by the impact of the 50 per cent tariffs slapped by the US on Indian exports entering the world’s largest economy, the rating agency has added.
It can be noted that the overall NPAs of the MSME sector, constituting 17 per cent of the outstanding loans of the banking system, stood at 3.59 per cent of the Gross Domestic Product (GDP) at the end of FY25.
“This fiscal (financial year), we see NPAs in the MSME sector increasing moderately to 3.7-3.9 per cent. This is primarily due to the recent, steep hike in tariffs announced by the US,” the agency’s Director Subha Sri Narayanan has said.
The tariffs will affect export-oriented MSMEs in sub-segments, such as textiles, garments and carpets, gems and jewellery, shrimp and processed seafoods and certain verticals of the chemicals sector, Ms Narayanan added.
Amid calls for pushing credit to small businesses to help drive economic growth, the agency has warned that the loans may also come with associated risks.
“It is pertinent to note that in the past, periods of rapid MSME growth have inevitably led to higher NPAs in the later years,” CRISIL has pointed out.

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