Bankers address challenges to SMEs at ASSOCHAM workshop

Industry body, Associated Chambers of Commerce and Industry in India (ASSOCHAM) and Ministry of Micro, Small and Medium Enterprise (MSME) brought the bankers and small medium entrepreneurs vis a vis to discuss the problem areas for SMEs, especially the inadequate financing at a conclave on “SMEs Sammelan- Meet Your Bankers”. Leading bankers present at the conclave hoped the Reserve Bank of India (RBI) will lower interest rates in its forthcoming monetary policy review to help ease credit flow to MSMEs as high cost of funds in the past two years has dented their competitiveness.

“Liquidity in the market has been tight in spite of cash reserve ratio being cut from 5.5 to 4.75 per cent on March 10. While the MSME sector continues to struggle for bank credit, repo rates should be reduced further to bring down cost of borrowing, encourage investments and boost growth,” said M. Narendra, chairman and managing director of Indian Overseas Bank at the meet.

Suggesting subsidized interest rates to promote and help small entrepreneurs, A.K. Gupta, executive director of Canara Bank, said that government should provide two to three per cent interest subvention for MSMEs for at least three years as they contribute 45 per cent to industrial production and 40 per cent to exports.

“There are 30 million MSME units in India and 12 million people are expected to join the workforce by 2015. Hence, banks should encourage cluster-based lending approach and extend the credit period beyond seven years,” said R.C. Khurana, general manager at the Bank of India, focusing on cluster-based approach of lending to SMEs.

The discussion also raised other pertinent issues of moderate infrastructure, restricted technology usage, poor marketing strategy and few others in the path of business development for SMEs.

ASSOCHAM president Rajkumar Dhoot, speaking for the creation of better infrastructural facilities for SMEs, said, “If the country has to achieve double digit growth, then it is important to extend them the much-needed infrastructure and finance.”

“Banks need to promote non-traditional proposals and enable MSMEs become globally competitive in terms of product quality, marketing strategy and product positioning,” added Dhoot who is also a Member of Parliament.

P.K. Jain, chairman of ASSOCHAM national council for MSMEs, said that Rs 10 crore cap for bank credit MSMEs should be raised so that they can deploy the latest technologies and become a part of the global supply chain.