Mergers of small banks may hurt credit sourcing of MSME sector: Report

MSME sector provides the bulk of employment and accounts for 45% of India's manufacturing

Mergers of small banks may hurt credit sourcing for the MSME sector as the resultant large lenders will be less keen on smaller-sized loans, said a report from financial services firm Resurgent India.

"The disadvantages of big banks are that services are less personable and local people abstain from reaching out to them. There are more fees associated with bigger banks. And, bigger banks are less motivated to work with MSMEs on loans due to smaller business accounts," it said.

Mergers of smaller banks into big will hurt credit sourcing for MSMEs, as smaller banks will be losing their identity, Resurgent India, managing director, Jyoti Prakash Gadia.

MSME sector, which provides the bulk of employment, accounts for 45 per cent of India's manufacturing, 40 per cent of exports and nearly 8 per cent of the country's GDP.