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Only one-third of the total MSME firms have access to banks & institutional financing channels: Assocham Study

Tags: MSME, Assocham Study, Indian Banking Industry, Resurgent India, D.S. Rawat

October 07, 2013 | COMMENTS ( 0 )

Only one-third of the total MSME firms have access to banks & institutional financing channels: Assocham Study

Just about 33-34% per cent of firms operating in the micro, small and medium enterprises (MSME) sector have an access to banks and institutional financing channels while the rest raise finance through informal financers, friends, family and other such personal channels, apex industry body ASSOCHAM revealed in its study.

 

A study titled ‘Indian Banking Industry: Sustaining Growth with Equity,’ jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Resurgent India says that, “Lack of adequate finance due to shortage of organized lending from banks and other formal sources of finance together with absence of transparency regarding their financial condition is proving to be a stumbling block in growth of MSMEs in India more so in eastern and north-eastern pockets of the country which are grappling with significant dearth of basic infrastructure like roads and electricity”.

 

The current overall debt finance demand of MSME sector is in excess of Rs 32 lakh crores and of this over Rs 6 lakh crore of debt is financed through formal sector. Besides, public sector banks (PSBs) account for over 70 per cent of debt financing to the MSME sector, while private and foreign banks account for over 20 per cent of credit flow.

 
Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the study said that, “MSME sector plays a pivotal role in India’s economic and social development as the sector accounts for about 45 per cent of India's total manufacturing output, about 40 per cent of India's total exports, thereby employing over seven crore people in over three crore units spread across the country manufacturing over six thousand products ranging from traditional to high-tech items,”.

 

“There is an urgent need to strengthen and streamline the credit guarantee system as in its absence the smaller units would continue to suffer neglect in accessing much needed credit for both inception and expansion,” said Mr Rawat. “There is also the need to spread awareness about formal financing opportunities within the MSME sector to grow their credit exposure, limit risks and seek better spreads by developing and implementing sector-specific policies,”added Rawat.

 

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