Banks must employ smart technology & innovative credit scoring to meet credit needs of MSMEs: Mundra

Mumbai, Oct 3 (KNN) Highlighting the 56 per cent credit gap in the micro, small and medium enterprises sector (MSME) finance sector, RBI Deputy Governor S S Mundra has suggested the banks to employ smart technology and innovative credit scoring to meet the credit needs of the sector.

Mundra said this while addressing the 3rd SBI Banking and Economics Conclave here recently.

Mundra, pointed that the 12th Five Year Plan (2012-17) highlighted a credit gap of 56 per cent in the MSME (micro, small and medium enterprises) finance sector in India.

In absolute terms, this translates to approximately Rs. 16 trillion which is roughly 25 % of the total bank credit.

“The outstanding credit to the MSE sector of all scheduled commercial banks as on March 31, 2016 has shown a declining trend,” he said.

The apex bank deputy governor said that RBI, in co-ordination with the Government of India and other stake holders has initiated several measures to enhance flow of credit to the sector.

“Banks need to employ smart technology and innovative credit scoring to meet the credit needs to especially the micro and small segment a large % of which are outside the formal financial system. In the process, however, the banks must guard against creating over indebtedness in the sector,” he added.

In his concluding remarks at the conclave, the theme of which was Setting The Priorities Right, Mundra said, “Cyber Risk/Frauds/Mis-selling/ Market misconduct have the potential to bring down a financial institution as recent events have shown. Banks need to do ‘value accretive’ and ‘value based’ financing

“I would like to end with a Chinese proverb which says, “The best time to plant a tree was 20 years ago and the second best time is now.” The sector would do well not to miss planting trees at the second best time,” he concluded. (KNN Bureau)