MSMEs see uptrend in payment delays: Report

However, India's smaller companies are well equipped to absorb shocks

The medium small and micro enterprises (MSME) of India have experienced an uptrend in delayed payments to their lenders in November indicating stress on their cash flows, according to a report.

"The average payment delays experienced by businesses indicates an uptrend in delayed payments, averaging to over 30 days for micro-enterprises in November 2023," according to MSME Sampark, a report by U GRO Capital and Dun & Bradstreet.

Shachindra Nath, Managing Director, U GRO Capital, said MSMEs will have to change their repayment behaviour. "Lenders will look at the delay in repayment as an opportunity but there's a need for MSMEs to work on their repayment behaviour," Nath said at the launch of the report.

MSMEs primarily source funds from banks to meet their working capital requirements.

The latest RBI sectoral credit data showed that bank credit to NBFCs stood at Rs 15.20 lakh crore in December 2023 compared to Rs 13.21 lakh crore the year before.

However, India's smaller companies are well equipped to absorb shocks arising from persistently high retail inflation on account of healthy balance sheets, said Arun Singh, Chief Global Economist, Dun & Bradstreet at the launch of a report on the country’s MSME sector.

"We have seen that MSMEs have remained safe from high inflation. Currently, they have healthy numbers and going ahead, they are expected to improve," said Singh.

Nath also said that MSMEs have built the strongest resilience in recent times. "MSMEs faced challenges in the past few years due to demonetization, goods and services tax (GST), etc. but in the recent past, they have built strong resilience," he said.

Finance Minister Nirmala Sitharaman on February 1 said the policy priority of the government will be to provide training for Micro, Small and Medium Enterprises (MSME) to compete globally. “Policy priority to provide training for MSMEs to compete globally, facilitating their growth will be important,” the Finance Minister said in her Budget speech.

The report highlighted that the exports by MSMEs have declined over the last year. "Share of MSMEs in the manufacturing sector has remained fairly constant and their share in overall exports has declined despite overall exports," the report said.