'Scope for banks to lend more to SMEs'

A Crisil study on the funding patterns of 2,000 small and medium enterprises (SMEs) in India reveals that there is scope for banks to increase their lending to SMEs by Rs 50,000 crore, the ratings agency said in a press release here.

The study indicates that while banks have been lending to the SME sector, they still have significant scope for increasing lending to the sector. The funding opportunity is greater for smaller SMEs where turnover is less than Rs 5 crore.

The study estimates that Indian banks funded on an average only around 60 per cent of the incremental working capital requirement between 2006-07 and 2008-09.

This is as against the common banking practice of financing up to 75 per cent of an entity's working capital requirement. This shortfall was funded by the SMEs from their own funds.