PSBs lose ground to private banks, finance companies in SME lending

Private banks and non-bank financial companies have made significant inroads in this segment

Public sector banks (PSBs), traditionally dominant in lending to small and medium enterprises (SMEs) are now facing a strong challenge mounted by private banks and finance companies to win away this business.

According to a TransUnion CIBIL analysis, a combination of high credit demand and relatively low bad loans (low rates of accumulation of non-performing assets or NPAs) makes lending to micro enterprises and SMEs (the MSME sector) among the most attractive of target segments. The MSME credit opportunity stands out in a period where credit growth to large corporates is somewhat constrained.

Private banks and non-bank financial companies (NBFCs) have made