MSME sector has bounced back, repayments normal: Sidbi CMD Ramann

Micro, small and medium enterprises (MSMEs) are on the road to revival. In the smaller units, which employ a limited number of people, bad loans have gone down. In the micro segment, the total loan exposure is less than Rs 5 crore. Small Industries Development Bank of India (Sidbi), the biggest lender in the small and medium enterprises (SME) segment, believes that the damage to the financial system would be a lot less than expected. This is because revival in the post-Covid economy showed no spike in defaults in government-guaranteed loans. The lender is leveraging the technology platforms from NSEL portal to goods and services (GST) network to cut its loan-disbursal time to just a third. Sivasubramanian Ramann, chairman & managing director of Sidbi, while speaking with Siddharth Kalhans, explains how MSME repayments have come back to normal.

Throughout the pandemic, it was the MSME segment that was the worst hit. What is your assessment of its state now?

Interventions made by the government under ECLGS (Emergency Credit Line Guarantee Scheme) have allowed credit flows to MSMEs struggling during the pandemic. Those entities received nearly Rs 3.5-trillion credit. This move has prevented all of them from slipping into the non-performing asset (NPA) category. A greater amount of handholding came from the Reserve Bank of India (RBI) as well as the government.

Are repayments happening on time?

MSMEs have bounced back. Repayments have virtually come back to normal. In the smaller units that employ a limited number of people, bad loans are likely to show up. In the micro segment, the total loan exposure is less than Rs 5 crore. We need to provide additional benefits to this segment. Larger entities showed tremendous resilience.

How did technology change your lending and refinancing processes?

Today, we are entirely digital. We are encouraging our officers to take their laptops to help customers fill in their details for loan applications. We run algorithms to assess businesses. Our credit appraisal system is fully digital. Our disbursements are also entirely digital. It is through a central disbursement.

Your fund-of-funds for start-ups has a sanction of Rs 7,200 crore, but the disbursements have been just about Rs 2,500 crore. Why this gap?

This is the fund of funds. We have given sanctions to over 80 alternative investment funds (AIFs), which in turn invested in about 700 companies. So, the amount of funds sanctioned is about Rs 7,200 crore. This has to go over a period of time. No company wants money in large doses. Money is always released in tranches. You are given a four-to-five year period in which you deploy the funds. We will see an increase in the disbursement rate, going forward.

Banks themselves are doing priority sector funding. Will it squeeze business for Sidbi?

The future cannot be dependent on priority sector shortfall funding. We are now looking at better risk management and better lending. We aim to do greater work to build our book on direct financing. We are getting much more data and using digital tools. My entire monitoring system is getting automated. We have worked with a few fintech companies to master the art of understanding GST data.