NBFCs go easy on MSMEs as NPAs bite

IFL Finance maintains a "very cautious status" on MSMEs and the microfinance business, chief financial officer Kapish Jain told analysts on 31 October, adding the focus is largely on "recovery and collection.”

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US tariffs hurt MSMEs' ability to repay loans.

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Credit rating agency Crisil has been sounding the alarm. In an October report, Crisil warned that bad loans in the MSME segment “may witness a cyclical inch-up, particularly in export-oriented sub-segments hit by the US tariff.”

The US has imposed a hefty 50% tariff on Indian goods, hurting production and cash flows at many export-oriented MSMEs in leather, textiles, chemicals, and gems and jewellery sectors, and impacting their ability to pay back loans.

The MSME sector accounts for more than 30% of India’s gross domestic product, and is the second-largest employer after agriculture.