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Public Sector Banks (PSBs) have continued to play a crucial role in financing the Micro, Small, and Medium Enterprises (MSME) sector, disbursing over INR 14.5 trillion in Q3 FY25. This marks an increase from INR 13.12 trillion in Q2 FY25, reflecting strong credit demand and economic resilience.
PSBs are often guided by government mandates and priority sector lending (PSL) norms. Under PSL requirements, banks must allocate 40 per cent of their net credit to specified sectors, with a significant share earmarked for MSMEs.
Here’s a closer look at how various PSBs have contributed to the MSME credit disbursal in Q3 FY25:
Among PSBs, the State Bank of India (SBI) maintained its leadership position, extending INR 4,96,359 crore in MSME loans, showcasing an 11.65 per cent year-on-year growth. The sector remains vital for the Indian economy, with banks focusing on priority sector lending and government-backed credit initiatives to support MSMEs.
Public Sector Banks disbursed over INR 13 lakh crore in loans in quarter ending September of FY25, with SBI leading at INR 4.56 trillion to MSMEs, reflecting a 17.36% YoY growth. Bank of Maharashtra recorded the highest YoY growth at 24.96%, while Indian Bank reported the sharpest NPA decline to INR 7,602 crore.
SBI Leads MSME Credit Growth
State Bank of India (SBI) continues to dominate MSME lending among PSBs, disbursing INR 4,96,359 crore in Q3 FY25, up from INR 4,56,491 crore in Q2 FY25. The year-on-year growth stands at 11.65 per cent. The bank’s MSME lending constitutes 14.36 per cent of its domestic advances. However, Non-Performing Assets (NPA) in the segment stood at INR 17,205 crore, a slight increase from INR 16,584 crore in Q2 FY25.Major PSBs report growth in MSME Credit
Bank of Baroda disbursed INR 1,31,769 crore in Q3 FY25, up from INR 1,26,828 crore in Q2 FY25. The bank posted a 13.6 per cent year-on-year growth and 3.9 per cent sequential increase. NPAs reduced to INR 10,800 crore from INR 10,893 crore in the previous quarter. Fresh slippages in MSMEs stood at INR 871 crore, the highest among all sectors.
Canara Bank
Canara Bank’s MSME lending reached INR 1,43,886 crore in Q3 FY25, up from INR 1,39,103 crore in Q2 FY25. The bank registered 7.11 per cent year-on-year growth and 3.44 per cent sequential growth. NPAs in the MSME segment stood at INR 9,995 crore, indicating an improvement from Q2 FY25.
Punjab National Bank
Punjab National Bank disbursed INR 1,59,383 crore, a 10.7 per cent year-on-year growth and 5.7 per cent sequential rise. MSME lending accounts for 15 per cent of its total advances. NPAs stood at INR 19,001 crore, forming 11.92 per cent of MSME loans.
“Our credit growth surged to 14.8 per cent in Q3 FY25, with corporate loans gaining momentum over the last two quarters, which wasn’t the case before, driven by demand from AMP projects, road infrastructure, and InvITs,” Bibhu Mahapatra, Executive Director, Punjab National Bank told ETBFSI in an exclusive conversation. He outlined bank’s focus on priority sector lending, exposure and approach to unsecured loans, progress in co-lending partnerships, expected recoveries from NCLT and NARCL, and IT investments.
Fastest Growing PSBs in MSME Lending
Bank of Maharashtra
Bank of Maharashtra reported a 20.8 per cent year-on-year increase in MSME lending, disbursing INR 47,606 crore. MSME loans form 20.82 per cent of the bank’s total advances. NPAs in the segment were INR 1,140 crore, comprising 2.39 per cent of total NPAs.
Central Bank of India
Central Bank of India’s MSME lending surged to INR 58,102 crore, a 23.64 per cent year-on-year growth. MSMEs constitute 21.46 per cent of its total advances. NPAs stood at INR 2,943 crore, making up 1.21 per cent of its total portfolio.
Challenges in MSME Lending: NPA Trends
While overall credit disbursals have surged, the NPA levels among PSBs remain a concern.
Bank of India’s MSME NPAs stood at INR 10,222 crore, with fresh slippages of INR 490 crore. Indian Bank reported gross MSME NPAs at INR 7,308 crore, comprising 8.12 per cent of MSME credit. Union Bank of India’s MSME NPAs were at INR 5,120 crore, forming 3.92 per cent of total advances. Indian Overseas Bank’s NPAs in MSME stood at INR 1,753 crore, comprising 4.07 per cent of the portfolio. Punjab & Sind Bank’s gross NPA was at INR 1,596 crore, forming 8.68 per cent of MSME credit.
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