EVALUATION OF MSME LOAN MONITORING AND RECOVERY SYSTEMS IN FIVE PUBLIC SECTOR BANKS IN INDIA: BUILDING EARLY WARNING SYSTEMS FOR ENHANCED ASSET QUALITY MANAGEMENT
Keywords:
MSME financing, Public Sector Banks, Early Warning Systems, Asset Quality Management, NonPerforming Assets, Credit Scoring, Loan Life Cycle Management, Make in India, Credit Risk Management, NPA Resolution.Abstract
This research paper conducts a comprehensive evaluation of loan monitoring and recovery systems across five major Public
Sector Banks (PSBs) in India, specifically focusing on Micro, Small, and Medium Enterprises (MSME) portfolio
management in alignment with the Government of India's "Make in India" initiative. The study examines current practices
in MSME Loan Life Cycle Management, Credit Scoring techniques for credit appraisal, and the implementation of Early
Warning Systems (EWS) to address the critical issue of asset quality deterioration in the banking sector. Through detailed
analysis of both primary and secondary data, this research evaluates strategies and tools employed by PSBs for monitoring
stressed accounts and NPA resolution, considering the significant policy emphasis on MSME sector development for
economic growth and employment generation. The findings reveal substantial variations in monitoring effectiveness across
PSBs, with direct correlations between sophisticated early warning systems and improved asset quality parameters. This
research contributes to understanding the critical role of enhanced monitoring mechanisms in supporting the MSME
sector's enormous potential for economic growth while maintaining banking sector stability through improved Gross NonPerforming Asset (GNPA) and Net Non-Performing Asset (NNPA) ratios.