TransUnion CIBIL (a credit information company operating in India) has introduced an MSME Credit Health Index, in partnership with the Ministry of Statistics & Programme Implementation (MoSPI). The main idea behind this launch is to measure the strength and development of the MSME sector in India.
The MSME Credit Health Index is framed using the credit data submitted by lending institutions to TransUnion CIBIL. This Index will provide better management of MSME credit risk, formulation of strategies, and policies to reinforce the revival of the MSME sector and the economy. This measurement model act as a numeric indicator to government, policymakers, lenders, and MSME market participants, as it helps to benchmark the health of the sector.
The newly launched Credit Health Index measures the credit health of India’s MSME industry by considering mainly two parameters. They are growth and strength. Growth is gauged by plotting the increment in exposure value or outstanding balances over time. Whereas, the strength is measured by plotting the decrement or increment in the credit risk of Non-Performing Assets (NPA). An increase in the Growth Index shows the improvement in credit growth; and an increase in Strength Index shows the better quality of the asset. Therefore, the basic principle of both the growth and strength indices is ‘higher the better’.
Kshatrapati Shivaji, Secretary of MoSPI commented that the MSME sector consists of more than six crore enterprises, which contributes about 29% of India’s Gross Domestic Product (GDP) and also offers employment to over 11 crore workers. So it is highly relevant to monitor the strength, growth, and progress of the MSMEs continuously. In such a way, the policies of MSMEs can be aligned and timely interventions can be taken as per the requirements.
Rajesh Kumar, MD, and CEO of TransUnion CIBIL conveyed his view point that the Index is accessible at the national level and across various MSME segments, lender categories, etc. Monitoring of the index will give insights for aligning different strategies and policies so that the implementation of funds and resources for the sustained development of MSME can be done efficiently.
An overall analysis of the Growth Index indicates lower growth in June 2020 owing to limited credit activity consequent to the containment measures discharged by the Government to control the spread of the COVID-19 pandemic. When considering the Strength Index of MSME, it reveals that the Index values across all segments have touched the same level in June 2020, while following a different track in the last two years.
However, sharp and increased attention given to recoveries, before the end of the financial year, resulted significantly in improving the strength of the Medium segment.