MSME Ministry includes loan application uniformity in draft policy to improve access to finance
New Delhi, Feb 15 (KNN) In efforts to improve MSMEs' access to financial assistance, the draft national policy has proposed the introduction of uniformity and simplification of various loan application formats and assessment process in line with learnings from supply chain financing.
The gap between credit and MSMEs has been widened even more due to the pandemic, hence it is safe to say that financial assistance is one of the most important aspects for MSMEs to function, recover and progress.
Considering the urgency to enhance access to financial services for MSMEs, it has also specified to initiate the development of customised products to assess the financing requirements based on expected cash flows and use details like personal guarantee, bank statement, GST data, standardized score cards to evaluate credit worthiness of MSME borrowers.
To encourage MSMEs to obtain Zero Defect Zero Effect (ZED) Certification from QCI so that the banks could pass on some benefit due to lower risks for such units by way of interest/ processing fee concessions is also one of the strategies formulated by the Ministry.
In addition to PSB Loans In59 Minutes portal, it has also suggested to develop facility for new entrepreneurs while enhancing the loan limit to Rs 5 core.
Further the draft policy recommends to ensure that all applications accorded in principal approval are disposed of within a period of 7-10 days.
With these steps the government aims to increase the accessibility to finance for a range of activities such as productivity, marketing and technology upgradation are caused by Information asymmetries, higher risks, sizeable transaction costs and a lack of adequate collateral.
Through these initiatives it also intends to counter the negative attitude displayed by MSMEs towards equity financing, and their inability to make the best possible use of available resources of funding.