70 per cent of MSMEs don’t have access to institutional finance: ASSOCHAM report
New Delhi, Apr 12 (KNN) Only 33-34% of firms from Micro, small and medium enterprises (MSME) sector have an access to banks and institutional financing channels while rest of them resort to informal channels like friends, family and other personal channels for raising loans said an Apex industry body ASSOCHAM.
A joint study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Resurgent India titled: Indian Banking Industry: Sustaining Growth with Equity shed light on the challenges obstructing the growth of MSME.
It highlighted that the lack of adequate finance due to shortage of organized lending from banks and other formal institutes along with absence of transparency posing severe challenges in front of MSMEs to obtain loans.
It further highlighted that due to scarcity of basic infrastructure like roads and electricity in eastern and north-eastern parts of India along with above mentioned challenges creating more blocks in the growth of MSME.
The present debt finance demand of MSME sector is in excess of Rs 32 lakh crores and of this over 6 lakh crore of debt is financed by formal sectors.
Besides this, Public sector banks (PSBs) account for 70% of debt financing to MSME sector while private and foreign banks account for over 20% of credit flow.
During the release, D.S. Rawat, Secretary General of ASSOCHAM said that RBI had taken various steps like priority sector lending norms to encourage greater bank led financing but due to demand-supply constraints the financing gap has widened.
In this direction, he said that need of an hour is to secure transparency of financial conditions amid MSMEs as it influences decisions on loan.
Many of the banks hesitate to offer loans to small scale units seeing the growth of non-performing assets in past, he added.
He further added that crying need is to strengthen and streamline the credit guarantee system and spread awareness about formal financing opportunities within the MSME sector to grow their credit exposure, limit risks and seek better spreads by developing and implementing sector-specific policies.
Also the study pointed out on the banks need to work with MSMEs linked to supply chains of their large corporate customers and leverage the relationship to manage and control credit exposures. (With Inputs from a media report) (KNN/YV)