September 21, 2025

Hold on tight, business lovers! The Micro, Small and Medium Enterprises (MSME) sector in India may face a small rise in trouble – Non-Performing Assets (NPAs) might inch up in select export-oriented industries. Crisil Ratings dropped this hint at their Banking Conclave 2025, warning that while things have improved a lot, some fresh challenges are brewing. Here's the good news first: Over the past five years, MSME NPAs have gone down sharply from 8.7% in March 2021 to just 3.6% in March 2025. This drop is like a shining light in the dark, thanks to good government policies, strict regulations, and the economy bouncing back after the pandemic. But wait! Crisil says the story might change a bit by March 2026. They expect NPAs to climb slightly, hitting between 3.7% and 3.9%. Why? The secret villain is global trade trouble. India’s exports to the United States fell for the third month in a row in August. Why? The US has raised steep tariff walls, doubling duties on Indian goods from 25% to 50% on August 27, after an earlier increase to 25% on August 7. This tariff jungle caused exports in August to plunge to $6.7 billion, a big 16.3% drop from July – the harshest monthly fall of 2025. Such blows hurt Indian exporters and can increase NPAs in MSMEs that depend on these exports. Adding solid data from the Ministry of State, Pankaj Chaudhary said that advances to MSMEs have steadily grown in the last five years. Meanwhile, NPAs have fallen from a scary 11% in March 2020 to about 4% by March 2024. RBI’s provisional December 2024 data shows this positive trend is still strong. How did the government tackle this? With a full turbo-charge! The Pre-Packaged Insolvency Resolution Process (PPIRP) was launched to quickly and cheaply fix stressed MSMEs. The RBI introduced a Prudential Framework in 2019 to spot and settle problem loans early. The COVID-19 pandemic saw more support through loan moratoriums and special resolution plans. In simple words, the MSME sector had been getting its act together super well, but fresh global trade storms, especially with the US tariff hikes, threaten to make some waves. Will the MSMEs keep sailing smoothly or face a few bumps? Crisil's watchful eyes say, "Watch this space!"

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Tags: Msme, Npa, Crisil ratings, Exports, India-us trade, Banking,