Loan concentration in some states creating NPAs, says Cibil

Banks concentrating on a few states has led to rising loan defaults and non-payments in the micro and SME commercial sector, a report by TransUnion Cibil said.

"Focusing on a few states deprive the lenders of an opportunity to exhibit calibrated loan growth. Currently, some banks tend to have analytical and strategic focus on five or at most ten states and may not be fully sensitive on the industry credit profile divergences," TransUnion Cibil India managing director and chief executive Satish Pillai said in a statement.

He cited the case of Rajasthan, which has the lowest non-performing assets (NPAs) for commercial loans at two%, but also the lowest concentration of loans.

According to a report, the NPA rate in micro-enterprises has been range-bound between 6 and 6.5%, but it is the SME segment that is showing a worrying trend in terms of asset quality, as the NPAs have grown to 11% from 8% earlier.

"The credit industry has been focusing on the micro and SME segments to overcome the challenges of commercial loan growth blues.

Nevertheless, the NPA rate trends in these two segments will also have to be monitored closely," it said.

Among other sectors it said real estate and construction businesses have observed significant high NPAs of over six%, but also witnessed loan growth of 11 and 14%, respectively.

The highest NPAs, of over 15%, are in leather, textile and steel industries, it said.

The state-run banks' share in SME loans has gone down with the private sector lenders growing in this segment.