Page 29 - Banking Finance July 2021

ARTICLE

For analysis if we take the data for December 2019 the which has the larger ticket size MSME loans, is again
utilization of working capital limits for PSB was at 80% dominated largely by PSBs.
for micro segment,76% for small segment and 69% for
For an example we can take the micro segment where
medium. The same data for private lenders are at 53%,
the domination of PSBS are mostly attributed to wide
55%and 49% respectively for micro, small and medium spread penetration as well as being the torch bearer of
segment for MSME. These are pre COVID-19 figures and all kinds of Govt Sponsored schemes. It is a well known
are bound to deteriorate going ahead for few quarters
fact that Public sector lenders are the preferred outlet
even though PSBs fare high in this criteria. for all developmental projects of Govt .

What are the major strengths of PSBs for
MSME lending?
Y In the last few quarters, Private Banks and NBFCs have
Y The major differentiating factor between PSBs and
strongly competed with Public Sector Banks in regaining private lender was use of technology. The EASE reform
a larger share of the MSME sector. However, that trend
agenda has started a mission to create a brand PSBs
has started to change in Dec '19 quarter with Public
and now for last few years PSBs are more and more
sector banks having regained market share from 48.2%
becoming tech savvy. They have started using AI, chat
in Sept '19 to 49.8% in Dec '19. The analysis below will
bots, algorithm based financing etc. The trend will
show the fighting back from the PSBs even in the
definitely help banks to leverage technology to cater
pandemic.
to MSME. Already few banks have tied up with different
fintech companies to provide end to end solution and
seamless financing activity.PSB command the largest

Y PSBs continue to be the dominant contributors in
providing credit to Micro segment borrowers, holding
almost 60% share in this segment. PSBs are playing a
critical role in enabling financial inclusion of Micro
Enterprises. The share of PSBs and Private Banks in the
Small segment of borrowers is the same, with each
having a market share of about 44%. Medium segment,

BANKING FINANCE | JULY | 2021 | 29