Can you give us your perspective on the importance of the SME sector in the Indian context and do you think that the contribution of SMEs to the overall GDP of the country is satisfactory at current levels?
MSME is an important sector for growth of a balanced economy. It develops entrepreneurs and provides employment opportunities which are very important for a developing country like India. At a rough estimate this sector is at present contributing about seven per cent to nine per cent of the national GDP and we may see this rise to about 15 per cent to 20 per cent in next five years. About 35 per cent to 40 per cent of our exports come from this sector.
The sector is facing many challenges viz. lack of R&D and innovation, power shortage, and competition from bigger players in the market etc. All these combined together can provide the desired growth impetus. With better training and R&D facilities and competitiveness of the products, the SMEs' share in the GDP is bound to increase
What are your views on the current set up for SMEs in terms of helping them in a better manner as far satisfying their financing needs are concerned? Can you also share with us something about SBIs SME Banking division and its various initiatives and products on offer along with any new initiatives and programmes that might have been planned for the SME banking space going forward?
We have a well developed set up for MSME at SBI. SBI is the pioneer in MSME lending. We have an experience of more than half a century in the area of financing Small Scale Industries and Small Businesses. Today with more than 13500 branches, two-third of which are in rural and semi urban areas, we have a deep reach.
We have many products and schemes designed specifically for the SMEs. These include not only loan schemes, but also equity funding schemes for providing seed capital. We have a dedicated Project Uptech Vertical assisted by various Technical Consultancy Cells to help budding industrialists and also for finding new ways and means for improving product quality and reducing the assembly line time in specific industrial clusters.
SBI has been innovating to make the experience richer for the MSME borrowers. Around 5-6 years back, we started setting up CPCs (Centralised Processing Cells) for processing and sanctioning loans upto Rs 1 crore. Further, in large ticket sizes we introduced the concept of RMMEs (Relationship Managers). Now the relationship concept is being introduced for loans above Rs 10 Lakh to Rs 1 crore.
With a view to provide impetus to manufacturing and services, we are emphasising that our operating functionaries lend under the CGTMSE scheme and thus provide collateral free loans to the micro and small enterprises.
SMEs and NPAs, as far as banking are concerned – can you give us your thoughts on it?
NPAs are there in every segment and are not peculiar to SMEs alone. Further, NPAs are also a result of many factors both environmental and internal. NPA management is very critical to the Bank and begins with the fact whether you have screened the borrower well, whether warning signals were heeded to, whether the bank was able to guide the borrower through difficult times etc. But while certain factors would be common to all the segments, in case of SMEs the state of the economy and external factors can cause a lot of stress in their functioning. For example, currently inflationary pressures coupled with the uncertain global economy is making the SMEs very vulnerable. During the last downturn, we came out with certain schemes viz. SME Care and SME Help, mainly to assist SME borrowers to tide over the difficult period. We are also looking to see what can be done currently to help our borrowers – especially those in micro and small segment.
How well do you think has SME banking developed in India?
At this juncture, we may safely say that the SME Banking is adequately developed in India, although scope exists for further innovation. The importance of this sector was identified in India very early and special ministries and departments etc have been set up which have come up with SME specific policies and other initiatives. The Banking Industry has been doing its bit with full willingness. But, a more effective recovery mechanism is required to minimise the evil of NPAs and thus help the Industry in financing more to this sector.
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What needs to be done to further provide a fillip to SME banking in India?
The Government has put in place policies and benchmarks to ensure that the segment gets full banking support. We at SBI are also doing our best to bring out products and schemes which could provide further fillip to SMEs. However, a large part of the SMEs are still unorganised, do not have the wherewithal to provide financial data, lack equity and do not have proper marketing skills. We need to work on these lines to see how these areas could be improved.
There has been a lot of talk about providing a platform for SMEs to sort out their financing problems like setting up a SME exchange. Do you think this will work?
Discussing whether it will work or not would be pre-empting the importance of this new initiative. SMEs have not only been facing debt shortage, but equity crunch as well. This is an initiative towards this. However, working of an exchange depends upon the activities of the investors active there. How they will behave would entirely depend upon the additional benefits available to them. Then only the SMEs i.e. the issuers could be benefitted. However, the relationship between the banking industry and the SME borrowers is not going to be impacted in any significant manner by this. With the relaxed issuing norms and other formalities, the SMEs would be able to tap the market – this is the key intention and may serve the intended purpose. However, at this juncture I would prefer to wait and watch what is happening in this arena.
What is the size of the market for SME banking here?
Immense