Saturday, January 16, 2021

Table of Contents for SME Space


There is a huge opportunity for banks as 92 per cent MSEs are still untapped



Over the last few years the Government of India has realised the enormous potential held by the country’s MSE sector and has been taking proactive steps to ensure improved lending performance. The Reserve Bank of India and the Ministry of Finance, besides raising the earlier Rs 5 crore ceiling for funding to companies in the small enterprises category, are now offering a lot of incentives for the sector. VIJAI MISRA, GENERAL MANAGER, CENTRAL BANK OF INDIA, shares his thoughts on the opportunities now available for banking institutions to fund micro and small enterprises. 


From a lenders perspective what are the opportunities available in the market?


Presently, almost 92 per cent of Micro and Small Enterprises (MSEs) do not have any avenues to obtain funds from institutions. Till date majority of these SMEs are sourcing funds on their own. So there is a huge opportunity for funding agencies to tap this potential.  Most of these units started from small units and then became medium scale companies.  Moreover, these are also first generation entrepreneurs and do not have any idea about finance market requirements. All these issues are problematic for a bank in sanctioning loans.  So yes, there is a huge opportunity available in the market in this segment but they come with a lot of challenges.


Which are the construction sector being funded by your bank?


We have launched special schemes for the construction sector.  We offer schemes for construction equipment which no other bank offers. We have financed 60-70 construction equipment players. We offer support for particular type of trucks, cranes, concrete mixers etc. Moreover, we also finance transporters and support small manufacturers of iron and steel bars.


What are the steps taken by your bank to improve credit to MSEs?


We have created a separate MSME vertical headed by a General Manger for focused lending to the sector. The bank also set up 535 specialised branches for MSME. We have financed independent women entrepreneurs who are looking to set up business. The Kalyani scheme supports women entrepreneurs up to a limit of Rs 1 crore with compulsory CGTMSE coverage. Under this scheme the bank pays guarantee fee for the first year.



  • Kalyani Schemes: Scheme for women entrepreneurs with limit of up to Rs 1 crore with compulsory CGTMSE coverage wherein bank pays guarantee fee for the first year.
  • Construction Equipment Finance: To provide for new machinery, equipment and vehicles for construction activities.
  • Contractor Scheme: Financial support to contractors of good reputation engaged in works on behalf of central government department, state governments and reputed private sector organisations.
  • Food Processing plus scheme: For financing food and agro based processing units. Business Gold Loan: Loan against security of gold coins, ornaments and jewellery for business purposes


What is the bank's present outstanding under MSE as on 31.12.2013, and the percentage of total advances?


The present outstanding under MSE stands at Rs 20,200 crore and a total advance is about 11 per cent. We have 500,000 SME accounts with a total outstanding of Rs 20,000 crore


Tell us about the current trends in borrowing?


I would say the nature of borrowers remains the same. They still demonstrate a lack of experience, skill and entrepreneurship. In addition, they do not have adequate infrastructure or proper machinery.  All these together create issues for banks in granting loans.


What is the extent of the competition of you are facing from NBFCs?


NBFC’s are very active in this field. They have a door to door reach whereas banks do not have that advantage. They have a better advantage than banks when it comes to price and charge more. We have a model that is totally different from the one followed by NBFCs. Banks meanwhile depend on their own sources and will continue to do so. As the market is huge – 92 per cent is still untapped – everyone has scope to grow.


  • 500,000 SME accounts with a total outstanding of Rs 20,200 crore
  • Growing at a rate of 30 per cent
  • Total FY-13-14 disbursement, Rs 8,000 crore, Rs 10,000 crore expected next fiscal.


Tell us about the debt restructuring that prevails in the MSE sector?


We are also doing a lot of restructuring for MSE sector which I think is good for the sector. It helps reduce the number of Non Performing Assets (NPAs).  As a lender every customer is important to us and we try to help them when they are in need.


Do you think lending to MSE sector is adequate?


It is not inadequate. There are banking guidelines for SMEs and as a bank we have to follow them.  Under these any company that requires finance of over Rs one crore needs a collateral for grant of loan.  


What is your growth strategy over the next 2-3 years?


We are growing at a rate of 30 per cent and we hope to continue the same growth rate over the next five years. Our bank’s corporate growth rate is 15 per cent where the SME sector sees much more growth. Presently


What are the steps taken by your bank to raise its lending profile?


Achieving 30 percent growth rate is itself a challenge.  In order to achieve this growth we are taking lot of initiative. We have launched various new schemes to reach out to the people. In addition, we are also conducting seminar and associating with industry bodies for awareness creation.


What are your expectations from the year — and the growth outlook for 2014?


We are very much confident that we will have a very positive growth outlook in ar 2014.  The sector is getting a lot of incentives and support from the government and that enables us to create positive stories. In this regard we are also trying to focus on cluster development segments like ceramic, toys etc which offer enormous potential.  Our total disbursement in FY-13-14 was Rs 8,000 crore. In the next fiscal we expect it will cross Rs 10,000 crore.

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