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The Reserve Bank of India (RBI) has allayed the fears of lenders about the rising delinquency levels among small business loan borrowers, who are hit hard by the COVID-19 second wave, saying the numbers are not alarming yet. The government and the central bank push to support MSMEs during the pandemic through credit measures like the emergency credit line guarantee scheme (ESLGS) saw lending to them jumping to Rs 9.5 lakh crore in the pandemic-hit FY21 from Rs 6.8 lakh crore in FY20, while the asset quality deteriorated to 12.6 per cent as of March 2021 from 12 per cent in December 2020.

RBI Deputy Governor Mukesh Jain said there is no crisis now on this front, as the stress level among small business borrowers are not very high, even though slippages and loan restructuring are rising of late. He noted that the situation is not very bad as many accounts are going in for restructuring under the COVID package version 2 announced in May, which allowed crisis-ridden borrowers to opt for up to two years of the moratorium. He said ‘yes, there is a visible increase in slippages among MSME borrowers, but the quantum of slippages has not reached an alarming level.’

Jain has stated that after the first wave, the RBI had asked all banks and systematically important NBFCs to take the stress tests, and their pre-COVID and March 2021 numbers show that there is an all-round improvement on all parameters, be it capital adequacy ratio, NPAs/slippages or the provision coverage ratio -- all have improved and are better than the pre-pandemic levels and added that there is also an improvement on their profitability numbers.