As stressed assets mount and banks increasingly face questions about lending to sick units, credit challenges facing the MSME sector could mount. As it is, the sector accounts for 45 per cent of Non-Performing Assets (NPAs).
At an Assocham event on ‘Financial Clinics for MSMEs’ here recently, Kalraj Mishra, Minister for Micro, Small and Medium Enterprises (MSMEs), spoke about problems being faced by the sector in getting credit, and rising complaints by bankers on being unable to lend due to repayment concerns.
“Banks have been told to lend without worry, but they are still not forthcoming because they fear NPAs,” said Mishra, adding that the Ministry was pulling out all stops to ease credit flow to the sector.
Reflecting bankers’ views, Sushil Muhnot, CMD of Bank of Maharashtra, suggested the MSME Ministry should consider setting up independent committees to help bankers identify the right candidates for lending.
“Bankers can be questioned on lending to units not doing well. In this situation, the Ministry could consider forming independent committees to support bankers,” he said.
He also suggested the need of professional guidance to MSMEs in preparing reports before they approach banks, and ensure bridging of the “information gap” between them and the bankers. In addition, he urged an enhanced corpus with the Credit Guarantee Fund, to help tide over the problem of delayed loan repayments.
According to a report brought out by the chamber, only 5.2 per cent MSMEs availed credit from financial institutions, as per the 4th Census on MSMEs.
The report said the MSME sector, a key player in the Make in India and Start-up India campaign, continues to faces challenges ahead due to “non-availability of timely and adequate funds at reasonable costs, non-conducive bank policies toward lending to start-ups, high cost of credit interest rates and lack of sufficient collateral.”
Source: Business Line
Image Courtesy: The Hindu Business Line
