Significant Growth in Loans for Self-Employed Individuals and Microfinance Sector
Mixed Trends in Portfolio Quality: Improvement for Self-Employed, Challenges for MSME Entities
The financial year 2024 saw significant growth in the Micro, Small, and Medium Enterprises (MSME) loan portfolio, reflecting increased credit availability for small businesses and self-employed individuals. This growth indicates a positive shift in India’s economic landscape, as more businesses and entrepreneurs gain access to financial support for expansion and operations.
Key Highlights of MSME Loan Growth in FY 2024:
1. Overall MSME Loan Portfolio Expansion
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The total MSME loan portfolio grew by 17.8%, reaching ₹64.1 lakh crore by March 2024.
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This increase highlights the rising demand for credit among small businesses and the growing confidence of financial institutions in lending to the sector.
2. Surge in Loans to Self-Employed Individuals
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Loans extended to self-employed individuals recorded an impressive growth of 28.9%, reaching ₹35.7 lakh crore.
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This sharp increase reflects a growing trend of entrepreneurship, with more individuals seeking financial support to establish or expand their businesses.
3. MSME Entity Loans Show Moderate Growth
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Loans sanctioned to MSME entities (businesses) grew by 6.6%, indicating steady but moderate demand.
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While businesses are actively seeking credit, their borrowing growth rate is lower than that of individual entrepreneurs.
4. Significant Increase in Loan Approvals
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In FY 2024, a total of 27.4 million MSME loans were sanctioned, amounting to ₹54.2 lakh crore.
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In terms of volume, this represents a 19.3% increase, while in terms of value, the growth was 5.4%.
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The number of loans sanctioned for MSME entities rose by 18.9%, though the overall loan value increased by only 3.1%.
5. Improvement in Self-Employed Loan Portfolio Quality
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The Portfolio at Risk (PAR) for 31-90 days in the self-employed segment improved, reducing to 2.97% in March 2024 from 3% in March 2023.
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This indicates improved repayment trends and better financial discipline among self-employed borrowers.
6. Decline in MSME Entity Loan Portfolio Quality
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The PAR in the 31-90 day category for MSME entities increased to 3.9%, compared to 2.5% in the previous year.
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The PAR in the 91-180 day category also rose slightly to 1.1%, up from 1% in March 2023.
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These figures indicate a slight rise in repayment delays for business loans, which could be a concern for lenders.
7. Strong Growth in Microfinance Loans
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The microfinance loan portfolio (small-ticket loans provided to individuals or groups) saw a remarkable 26.8% growth, reaching ₹4.4 lakh crore.
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The volume of microfinance loans increased by 6%, with 83.5 million loans sanctioned, amounting to ₹3.8 lakh crore (a 19% rise).
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This reflects a strong demand for microloans, which play a crucial role in financial inclusion for small entrepreneurs.
Conclusion: The significant growth in MSME and microfinance lending during FY 2024 highlights the increasing financial support available for small businesses and self-employed individuals. The substantial rise in loans to self-employed individuals suggests a shift towards entrepreneurship, while MSME business loans are growing at a steady pace.
However, concerns remain regarding portfolio quality in the MSME entity segment, where repayment delays have slightly increased. This could require closer monitoring by financial institutions to ensure sustainable lending practices.
Overall, the MSME sector remains a key driver of economic growth, and its expanding access to credit is a strong indicator of resilience and progress in India’s business ecosystem.
