MSME NPAs Expected to Rise Marginally in Export Sectors: Crisil

Quick Summary

• Crisil Ratings has projected a slight increase in non-performing assets (NPAs) for MSMEs,especially in export-oriented sectors,due to global trade challenges and portfolio seasoning.
• The gross NPA ratio of the MSME sector has improved substantially from 8.7% in March 2021 to 3.6% in March 2025 but is expected to inch up to 3.7%-3.9% by March 2026.
• India’s exports to the U.S. fell for a third consecutive month, with August exports dropping sharply by 16.3% from July, following tariff hikes that doubled duties on Indian goods in August.
• Over five years (March 2020-March 2024), funded advances outstanding for MSMEs grew from ₹16,97,836 crore to ₹28,04,511 crore while gross NPAs declined considerably during the same period-from an NPA ratio of about 11% down to about 4%.
• Government measures like Pre-Packaged Insolvency resolution Process under IBC and relief measures during COVID-19 have supported declines in npas.

Indian Opinion Analysis
The marginal uptick forecasted for MSME NPAs comes as a reminder that despite steady progress over recent years due to proactive policy support and regulatory interventions, external economic conditions remain critical for sustaining this trajectory-especially with global trade headwinds and elevated U.S.-imposed tariffs harming export growth. Sectors relying heavily on foreign markets are more vulnerable; though, notable improvements over the last half-decade underscore resilient policy frameworks aimed at cushioning risks within the domestic financial ecosystem.

India’s ability to navigate these rising challenges will require focused governmental intervention through bilateral negotiations or diversification strategies for exporters dealing with rising foreign protectionism pressures like those imposed by Washington’s tariffs.

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