FM Sitharaman: MSMEs were earlier looked by banks as only cameo of larger businesses which they were not

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Updated: September 26, 2021 3:10 PM

Credit and Finance for MSMEs: Citing the government’s export target of $400 billion in FY21 and $2 trillion by 2030, Sitharaman asked banks to be nimble to understand their customer’s requirements and their nature of exports.

The government must remain open-minded and flexible if it wants to meet its ambitious target.The minister also praised IBA for getting eight banks to form the Account Aggregator framework.

Credit and Finance for MSMEs: Finance Minister Nirmala Sitharaman on Sunday complimented banks for understanding the credit needs of micro, small, and medium enterprises (MSMEs) and catering to them with a different approach that took banks ‘some time’. In her keynote address at the 74th Annual General Meeting of the Indian Banks’ Association (IBA) in Mumbai, Nirmala Sitharaman said, “Couple of years ago, the gripe was that MSMEs and their requirements were never understood because you (banks) looked at them as only a cameo of larger businesses which they were not. It took you some time but you did change and understood that the needs and the cash flow structure of an MSME were different. Therefore, you had to cater to them with a different kind of approach.”

The minister was speaking in the context of urging banks to also cater to the unique requirements of businesses relocating from other countries to India similar to how they catered to the unique needs of MSMEs. “Similarly, I think this rapid relocation of businesses from countries outside India, each of their requirement will be unique to them and even that requires a lot of understanding. You need a lot of specialists who can come, at least part-time, and be with you as consultants to understand (their) credit requirements, (and) money flow requirements,” Nirmala Sitharaman added.

Citing the government’s export target of $400 billion in FY21 and $2 trillion by 2030 of which $1 trillion is merchandise goods exports and the other $1 trillion is service exports, Sitharaman asked banks to be nimble to understand their customer’s requirements and their nature of exports.

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The minister noted, “If the (export) target is $400 billion within a year, it cannot happen unless banks are going to be nimble. Identify your (banks) export customers, make sure you understand the nature of their business and the countries to which they are exporting. Therefore, you need to have a lot more understanding of each of the businesses.

The minister also praised IBA for getting eight banks to form the Account Aggregator framework — Axis Bank, ICICI Bank, HDFC Bank, IndusInd Bank, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank – that will provide tailor-made portfolios for people to choose from. This will help improve credit outreach to the people, the minister said. “If the framework is put to good use, we would not need specialized credit outreach. Government together with RBI has been helping with protocols and frameworks, helping banks attain more through the digital systems in the industry.”

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