Lending to SMEs is simple when you have access to reliable cash flow: Dinesh Kumar Khara, Chairman of SBI

MSMEs’ Access to Credit and Financing: On Monday, State Bank of India Chairman Dinesh Kumar Khara remarked that SMEs’ access to solid cash flow is the ideal approach to offer hassle-free loans since it makes lending very easy. “I’m confident,” Khara said at Finance Minister Nirmala Sitharaman’s post-budget interaction with industry representatives in Mumbai, “because with the credible bureau scores we have, if we get access to credible cash flows, perhaps growth for SMEs (loans) will be as high as about 6-8 percent per year.”

Khara was replying to a request made at the event by Revenue Secretary Tarun Bajaj that SBI, as the country’s banking leader, establishes a strategy to pump credit into the economy and address the credit-related challenges of businesses and MSMEs in the next two to three years. While it is often believed that banks do not sanction loans, Khara claims that while the underutilization of working capital restrictions has decreased by around 900 basis points, the underutilization rate is still as high as 52%.

Moreover, bank credit to micro and small businesses (MSEs) increased to Rs 12.53 lakh crore in December 2021, up from Rs 11.48 lakh crore in December 2020, according to Reserve Bank of India (RBI) statistics on sectoral bank credit deployment in December. In December, bank credit to MSME accounted for 13% of India’s total gross bank credit of Rs 116.83 lakh crore, up from 12.01 percent in November and 12.17 percent in October.

In his advice to banks, the new Economic Advisor V Anantha Nageswaran stated that lenders may make far more active use of the account aggregator structure to overcome the present information gap and promote better availability of funds to businesses.

The Reserve Bank of India developed the account aggregator network last year to provide an institutional framework for smooth and safe data interchange digitally between, for example, a borrower and a bank for credit availability. The goal was to save borrowers time by collecting and exchanging information with the lender, such as scanned copies of bank statements, stamped papers from notaries, bank statements, GST reports, cash flow, and so on.

Nirmala Sitharaman, the Finance Minister, has also asked banks to be more customer-friendly when it comes to aiding small enterprises and startups. “Our Prime Minister has told you that I am your security, therefore please take out loans.” That’s where he informed banks that I’m the security behind the Mudra and PM-SVANidhi initiatives (entrepreneurs). Nirmala Sitharaman remarked, “The performance in terms of servicing (these) loans is extremely satisfactory.”


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