Credit and Finance for MSMEs: State Bank of India’s Chairman Dinesh Kumar Khara on Monday said access to credible cash flow of small and medium enterprises (SMEs) is the best way out to enable hassle-free loans as it makes lending very easy. “I’m confident because with the credible bureau scores we have, if we get access to credible cash flows, perhaps growth for SMEs (loans) will be as high as about 6-8 per cent per annum,” said Khara at the Finance Minister Nirmala Sitharaman’s post-budget interaction with industry representatives in Mumbai.
Khara was responding to a suggestion by Revenue Secretary Tarun Bajaj at the event that as the leader of the country’s banking sector, SBI should devise a system in order to push credit into the economy and address the credit-related issues of entrepreneurs and MSMEs in the coming two-three years. Khara, noting while it is perceived that banks don’t sanction loans, said that the under utlisation of working capital limits have come down by about 900 basis points but still at that level, the under utilisation is as high as 52 per cent.
Importantly, bank credit to micro and small enterprises (MSEs) in December 2021 stood at Rs 12.53 lakh crore, up from Rs 11.48 lakh crore deployed in December 2020, Reserve Bank of India’s (RBI) data on sectoral deployment of bank credit in December showed. The share of bank credit to MSME in India’s total gross bank credit of Rs 116.83 lakh crore in December was 13 per cent in comparison to 12.01 per cent in November and 12.17 per cent in October.
The new Economic Advisor V Anantha Nageswaran in his advice to banks said lenders can make use of the account aggregator framework much more actively to address the existing information gap and facilitate greater availability of funds to entrepreneurs.
In order to provide an institutional framework for seamless and secure data sharing digitally between let’s say a borrower and a bank for credit access, the Reserve Bank of India had launched the account aggregator network last year. The intent was to help borrowers avoid spending time in collating information such as scanned copies of bank statements, stamped documents from notaries, bank statements, GST returns, cash flow, etc., and then sharing it with the lender.
Finance Minister Nirmala Sitharaman also urged banks to be more customer-friendly with respect to supporting entrepreneurs such as small businesses and startups. “Our Prime Minister has said that I’m the security behind you, please take loans. That’s is where in Mudra and PM-SVANidhi schemes, he told banks that I’m the security behind them (entrepreneurs). The performance in terms of servicing (these) loans is very good,” Nirmala Sitharaman said.