Banks must ensure MSME financing, says RBI deputy governor

Lending to micro, small and medium enterprises (MSMEs) makes a strong business case for the banks in view of the changing dynamics in the economy like demographic patterns, urbanisation trends, increasing thrust on industrialisation, addition of new customers under financial inclusion programme and growing levels of literacy, RBI deputy governor SS Mundra said.

Launching the National Mission for Capacity Building of Bankers for financing MSME Sector in College of Agricultural Banking, Pune today, Mundra urged banks to be sensitive towards the lifecycle needs of their MSME clients and develop innovative products that are suitable to their unique and seasonal requirements for working capital and for capital expenditure purposes.

He said the Reserve Bank and the government of India have taken various initiatives like Trade Receivables Discounting System (TReDS) and rehabilitation of sick SMSMEs, which will go a long way in supporting and nurturing the sector.

''A paradigm shift in financing of micro, small and medium enterprises (MSMEs) will also happen as and when new small finance banks are licensed. These will make the financing of MSMEs more competitive in the coming days. Banks will be able to face this competition only if they are more sensitive to the needs of the small entrepreneurs,'' he added.

Mundra also released a training kit designed and developed by College of Agricultural Banking which is targeted at managers of bank branches specialised in financing MSME and trainers of banks' training institutions/colleges/learning centres.

The national seminar organised by the Reserve Bank's College of Agricultural Banking was attended by 31 banks from public, private and foreign banks.

The Reserve Bank has launched a national capacity building programme to sensitise and upskill bank officials dealing with MSME financing.

Called the National Mission for Capacity Building of Bankers for financing MSME Sector (NAMCABS), the programme aims at developing skills for MSME lending and to develop entrepreneurial sensitivity among the field level functionaries of specialised MSME branches of commercial banks.

MSMEs contribute nearly 8 per cent of the country's GDP, 45 per cent of the manufacturing output and 40 per cent of the exports. They provide the largest share of employment after agriculture.

They also develop a diverse range of products and services to meet the needs of the local markets, the global market and the national and international value chains.

There are 46.76 million enterprises in the MSME sector providing employment opportunities to 106.15 million people across the country.

Focus programmes such as `Make in India', `Skill India' and `Digital India' as also other initiatives such as revising the definition of MSMEs, provide a framework for rehabilitation of MSMEs.