MSME borrowers taking multiple loans may become a headache for lenders

Loan defaults rise in three years; finance companies becoming vulnerable

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Those taking multiple loans, often termed as loan stackers, especially in the micro, small and medium enterprises (MSME) space, might become a major headache for lenders in India. The default rates for borrowers who take a number of loans from multiple lenders within 60 days jumped from 2.5 per cent to 4.4 per cent in September 2018, according to “MSME Pulse” by TransUnion CIBIL and SIDBI.

The stacked loans by borrowers have a higher potential of turning into non-performing assets (NPAs). This phenomenon is predominantly observed in