RBI to banks: MSME lending can be more competitive
Urging the banks to be sensitive towards the need of small entrepreneurs, the Reserve Bank of India (RBI) said that lending to Micro, Small and Medium Enterprises (MSMEs) will be more competitive once small financiers get bank licence. "Lending to MSMEs makes a strong business case for the banks in view of the changing dynamics in the economy like demographic patterns, urbanisation trends, increasing thrust on industrialisation, addition of new customers under financial inclusion programme and growing levels of literacy," said RBI Deputy Governor, S S Mundra. He said that banks should help small entrepreneurs develop innovative products that are suitable to their unique and seasonal requirements for working capital and for capital expenditure purposes. “A paradigm shift in financing of MSMEs will also happen as and when new small finance banks are licensed. These will make the financing of MSMEs more competitive in the coming days. Banks will be able to face this competition only if they are more sensitive to the needs of the small entrepreneurs,” he said, at the launch of the National Mission for Capacity Building of Bankers for financing MSME Sector, in College of Agricultural Banking, Pune. Seeking to address concerns of banks on bad loans, he said that the central bank and the government have taken several measures to support and nurture MSMEs, which will help the sector and reduce cases of NPAs. The government is also considering the introduction of Trade Receivables Discounting System (TReDS) and rehabilitation of sick SMSMEs, the Deputy Governor said. The national capacity building programme launched by the RBI is aimed at skilling bank officials in dealing with MSME financing. More than 4,500 officials dealing directly with MSME lending are expected to be trained through this initiative in one year. The MSME sector contributes nearly 8% of the country’s GDP, 45% of the manufacturing output and 40% of the exports. MSMEs create maximum number of employment after agriculture and develop a diverse range of products and services, catering to domestic and global markets. According to government estimates, more than 465 lakh enterprises in the MSME sector are providing jobs to 1060 lakh people across the country.
August 08, 2015 | 1:22pm IST.
to success.