MUMBAI : Recognizing that there is a disconnect between credit policies for micro, small and medium-sized enterprises (MSMEs) written by senior bank officials, and implemented at the branch level, public sector banks now offer help to business owners to get through periods of stress. This will help better target the government’s MSME loan program, according to experts from mintThursday’s Pivot or Perish webinar said.
“In June, we appointed 80 deputy CEOs across India, who will now be the single point of contact for MSMEs (with the bank). This is what has been lacking, “said Challa Sreenivasulu Setty, CEO of the State Bank of India.” There has always been a disconnect between top management and the branches. The MSMEs sector had many ailing units even before the covid-related challenges at the operational level and banks had to decide whether to finance them or not. “
“Lending to an MSME requires a lot of commitment and control on the part of the bank and the branches found this difficult,” Setty said. “This has resulted in simple MSMEs products not being delivered on time, such as a property loan or an overdraft. There are horror stories of clients who have to visit a bank for 30-45 days (to get an overdraft). That is why MFIs and NBFCs have a market share of 30-35% in loans to MSMEs, since most of the clients were not served by banks. it cannot be completely eliminated, but we need to put an efficient system in place. Zone officers will now be a single point of contact for MSMEs. They need someone to guide them and make the products available quickly. “
On May 13, the Center had announced an emergency credit guarantee line plan for ₹3 trillion to help small business owners overcome the covid-19 crisis. However, so far, the loans are worth only ₹32 billion rupees have been sanctioned by public sector banks under the scheme. mint reported on June 11 how government fees totaling ₹5 billion MSMEs had pushed them to the limit after the shutdown began.
“Banks should quickly disburse loans to MSMEs, as these are low-cost funds and there are credit guarantees,” said Naushad Forbes, co-chairman of Forbes Marshall. “At the same time, there are so many loan review mechanisms to ensure there are no bad loans. These two policies tend to fight each other (making it difficult to disburse loans. “
Deepak Jain, president of the Association of Manufacturers of Automotive Components, said that it is still difficult to access bank financing. “It is not easy for a MSME to obtain money. If an MSME cannot find other ways to keep its business afloat, it will close the store. If MSMEs fall, banks will have more non-performing assets. The only solution is to digitize loan disbursement with flexibility and agility. If MSMEs are confident that they can get loans, we can find a more stable outcome from this crisis, “he said.
Setty said: “We want to revamp the delivery system. The simple fact of sending more officials does not improve it, the system has to improve and be more efficient. “
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