The Reserve Bank of India (RBI) on Tuesday asked banks to equip themselves to deal with emerging challenges and be prepared to cash in on the opportunities unleashed by higher growth in dealing with the needs of small and medium enterprises. “Banks have to look for new delivery mechanisms. They must economise on transaction costs and provide better access to the currently under-served. To serve new rural credit needs, innovative channels for credit delivery will have to be found,” said K. C. Chakrabarty, Deputy Governor, RBI, while speaking on ‘Empowering MSMEs for financial inclusion and growth — issues and strategies', at the Central Bank of India SME Conclave here. Notwithstanding the increase in credit outstanding to the sector, access to adequate and timely credit at a reasonable cost was a critical problem faced by this sector, said Mr. Chakrabarty. Another issue faced is that the MSE borrowers, especially new generation entrepreneurs, do not have collaterals to offer to avail of bank finance.The ability of MSMEs (especially those involving innovations and new technologies) to access alternative sources of capital like angel funds/risk capital needs to be enhanced considerably. For this purpose, removing fiscal/regulatory impediments to use such funds by the MSMEs should be considered on priority, said Mr. Chakrabarty. Growing incidence of sickness in the sector is another area of concern.An exit route for non-viable units was necessary to manage sickness, said Mr. Chakrabarty. “Business failure in India is viewed as a stigma, which adversely impacts individual creativity and development. The existing legislations may have to be toned up so as to provide for efficient liquidation of non-viable businesses.”
HBL
