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Letter to BS: MSME sector is crucial when it comes to job creation

Banks have to be more vigilant and prudent in identifying the borrower

Business Standard 

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This refers to “MSME outreach drive starts today: Loan approvals for Rs 1-10 mn in 59 mins” (November 2). At a time when banks in general, and state-owned banks in particular, are burdened by stressed assets, and are taking deep haircuts for the resolution of the cases referred to the National Company Law Tribunal, this move raises the question whether the proposed disbursement will add to the existing non-performing assets or serve the purpose for which it is given.

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The funding made by the banks for the Integrated Rural Development Programme and other government- sponsored schemes have not served the purpose. The MSME sector is crucial when it comes to and supports the Make in India programme. As compared to the corporate sector, the credit requirement is small, and the viability rate is high as most entrepreneurs are inexperienced. The intention and the objectives behind the move are noble, yet the success depends on how the government develops a conducive environment for the smooth functioning and development of MSME units. At this juncture, the banks have to take it as a business opportunity, but while ensuring the speedy delivery of credit, they should not compromise on the quality of the asset they are going to create. Banks have to be more vigilant and prudent in identifying the borrower, extending need-based credit and ensure its timely recovery.

VSK Pillai Kottayam

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First Published: Sun, November 04 2018. 22:03 IST