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Bengaluru: Scheduled Commercial Banks, including state-owned, private, and foreign banks, have written off Rs 1.08 lakh crore in loans to Micro and Small Enterprises (MSEs) over the last five years (2019-20 to 2023-24), according to a written reply by Minister of State for Finance Pankaj Chaudhary in Rajya Sabha on Tuesday.
This includes Rs 43,789 crore in loans for MSEs in industries and manufacturing, and Rs 64,819 crore in services MSE loans.
According to the Reserve Bank of India data tabled by Chaudhary in Rajya Sabha, MSE loans worth Rs 20,261 crore were written off in the previous fiscal year, down from Rs 28,392 crore in FY 2022-23. Similarly, Rs 20,055 crore was written off in FY20, compared to Rs 15,661 crore in FY21 and Rs 24,239 crore in FY22.
Sector wise, Public Sector Banks (PSBs) accounted for the majority of MSE loan write-offs, with Rs 73,358 crore written off between FY20 and FY24, compared to Rs 32,098 crore by private banks and Rs 1,013 crore by foreign banks during the same period.
Year-wise, PSBs wrote off Rs 12,853 crore in FY24, compared to Rs 6,721 crore by private banks and Rs 390 crore by foreign banks. Similarly, Rs 16,859 crore MSE loans were written off by PSBs in FY23 against Rs 10,743 crore by private banks.
When a loan is written off, it means that the lender (usually a bank or financial institution) has deemed the loan as uncollectible and has removed it from their balance sheet. This typically occurs when the borrower has defaulted on the loan and the lender has exhausted all avenues to recover the debt. This is different from a loan waiver which is a temporary moratorium on the obligation to pay debt.
In the recent Union Budget, Finance Minister Nirmala Sitharaman announced a credit guarantee scheme to facilitate easier access loans by MSMEs in the manufacturing space, without collateral or third-party guarantee.
"The (credit guarantee) scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance", said Sitharaman.