Volume 6, Number 2

A Study on Profitability of MSME Lending Business for Banks in India

  Authors

Mukesh Kumar¹, Suruchi Pandey² and Abhineet Saxena³, ¹Reserve Bank of India, India, ²Symbiosis Institute of Management Studies Symbiosis International University, India, ³IPS Business School, India

  Abstract

Micro Small and Medium enterprises play a very important role in India economy. MSMEs face several problems, non-availability of finance is an important challenge for MSMEs in India. Among MSMEs, micro unit face even more challenges as compared to medium and small enterprises. This research paper is a study on the profitability of MSME loans given by banks in India. The analyses conclude that the growth of MSMEs is higher than the growth of GDP and hence MSMEs are driving growth of the country; MSMEs are paying higher rate of interest and hence banks generate better interest income on these loans; and the NPAs in MSME accounts are lesser than the NPAs in large accounts. Hence the study concludes that lending to MSMEs by banks is more remunerative and is also helping the country increase its GDP growth and employment. Therefore, the banks should provide more loans to MSMEs by simplifying their processes.

  Keywords

MSME, Bank Loan, Non-performing Assets, Interest Margin.