MSMEs' input costs rising, but risk to restructured loan book could fall

If MSMEs are unable to pass on input costs to their customers, then units, especially weaker ones, are likely to face difficulties, said a senior executive of a private bank

The war in Ukraine is pushing up input costs for MSME: the latest crisis for a sector that first battled a slowdown in 2020 and then Covid-19 for two years.

The troubles usually would mean a bleak scenario for MSME (Micro, Small and Medium Enterprises), marked by the risk of defaults and an uptick in bad loans. However, rating agency Crisil’s view earlier this financial year that MSME’s restructured credit pool will improve adds a twist. CRISIL's revised outlook last week said that only one fourth of recast loans are at risk of becoming non-performing assets (NPAs), as against its