MSMEs are in the eye of the storm with NPAs reaching 5.90 percent as of March 2015 even though the net accretion to the portfolio has gone down from 12.3% in 2014 in terms of number of accounts to 10.1% with a corresponding decline in amount outstanding from 23.9% to 13.6%. The industry NPA level was 5.47 although at the systemic level both industry and MSMEs represent 4.7%. Only 7.9% constitute MSME advances to the total advances. (Financial Stability Report No.11, July 2015)
Risk appetite for the MSMEs is very low among banks and their adherence to the guidelines of both the RBI and GoI to identify sickness at incipient stage and introduce corrective action plans is highly suspect. There is reluctance among banks for either restructuring or revival of even viable advances. Their credit origination has also no less to blame. Monitoring and supervision are hit hard by lack of adequate field staff leaving most accounts for arm chair surveillance.