New Delhi, Apr 11 (KNN) Predicting the lifecycle of MSMEs, particularly the Micro units, is a difficult proposition, said RBI Deputy Governor SS Mundra adding that the micro entrepreneurs neither have keen business acumen nor sizeable resources.

As opposed to larger businesses, the inability to respond in time to the vagaries of these business cycles can often prove fatal to the Micro enterprise. With timeliness of resource support being such a critical element at different stages during the life cycle of small businesses, let me flag a few initiatives which RBI has taken to address the issue, he said addressing at the ‘Bankers-Borrowers-Business’ meet held last week.

Mudra, while deliberating on Empowering MSMEs: Issues & Challenges spoke about three fundamental issues pertaining to the MSME sector: firstly, enabling better understanding of the sector by the banking community; secondly, ensuring timely financial support to distressed Micro and Small enterprises; thirdly empowering MSMEs, an objective that is closely linked to the first two.

RBI Deputy Governor also highlighted that an extremely important, but relatively much less appreciated aspect of credit delivery system is the availability of trained human capital within the banks.

“Bankers ought to have a sound understanding of the businesses that they finance. In respect of established businesses with predictable cash flows, conducting a credit appraisal, developing a proper understanding of the business cycle and analyzing problems is a lot easier when compared to small businesses, which often do not follow a set business cycle, are too dependent on idiosyncratic events and where promoters are not in a position to bring additional equity quickly. In this decade of retirements for the PSBs, the number of trained personnel has been dwindling very fast while the relatively inexperienced bottom rung does not possess appropriate skill-sets to lend to the MSME sector, which is perceived to be risky and costlier to service,” he said.

Talking about the recent announcement by RBI Governor Raghuram Rajan about credit counsellors, Mundra said, “Since MSMEs are typically enterprises with weak credit histories and inadequate expertise in preparing financial statements, credit counsellors can help bridge the information gap and thereby help banks make better credit decisions. The Reserve Bank will hold consultations with all the stakeholders and come out with guidelines for this by September 2016.”

Concluding the address, he said, “The MSMEs are key to a sustainable economic growth and hence, it is in our collective interest that these enterprises thrive. To paraphrase Mao-Tse-Tung, “Let a billion MSMEs bloom!” To paraphrase Mao-Tse-Tung, “Let a billion MSMEs bloom!” (KNN Bureau)