MSMEs get only 50% of required loans: GCCI

Small businesses get just about half the loan they require, the apex body for trade and commerce in the state said during a meeting with banks, other lenders and national banking regulators. Bankers on the other hand asked businesses to make their accounts transparent so that disbursement of loans is not delayed.

A meeting of businesses under Gujarat Chamber of Commerce and Industry (GCCI), Reserve Bank of India (RBI), Public Sector Banks (PSBs), private banks and Non-Banking Finance Corporations (NBFCs) was held in the city recently. The discussion was held on the topic 'Finance: A Key Criterion for Sustainability of MSMEs' to create a joint strategy for increased lending to Micro Small and Medium Enterprises (MSMEs) in the current scenario.

"Lack of adequate finance was one of the reasons for the closing down MSME units and therefore proper as well as timely hand-holding is needed to ensure MSMEs survival," said Jaimin Vasa, president of GCCI.

He lamented the fact that on the one hand bad loans (Non-Performing Assets) are on the rise and on the other hand, the share of MSME in overall lending by PSBs is falling. However, the share of private banks and NBFCs in lending to MSMEs has increased. "There is still a huge gap of around 50 per cent between the requirement of finance for MSMEs and finance provided by the financial institutions," said Vasa adding that MSME sector is the worst hit segment in such cases and is also always among the first to be hit.

Bankers also drew attention to the shortcomings on the part of businesses while seeking a loan. They urged businesses to be more transparent and disciplined as loans given to them are from the savings of the masses. "Often it is found that businesses utilise a part of loan for personal expenses rather than business purposes. This is bad both for the businessman and for the bank as well. Then there are demands for loan waivers and hair cuts. This can't be allowed," said a senior official of a leading PSB.

GCCI and bankers decided to set up an Advisory Task Force consisting of leading bankers from public, private and co-operative sectors and representatives from GCCI, for periodic monitoring of the economic scenario and suggesting corrective measures for financing MSMEs.

What do MSMEs want?

Loans difficult for high risk projects

Receivables are a major concern for the MSMEs

MSME Gold Card can be introduced by banks on the lines of Exporters' Gold Card

Banks need to come up with products for financing the margins

Collateral requirement of upto 20% should be reduced for forward booking

LUT/LOU should be restarted as they are very useful.

What are bankers saying?

Businesses divert funds for personal use

Business info comes in piecemeal basis

Coop banks want to included under CGTMSE

NBFCs want lending in sub-parts as specialty lending

Courses on financial literacy for MSMEs jointly by GCCI and banks

MSMEs should be mindful of their CIBIL records and ratings