What measures can Banks take to help the SME sector to spreadhead India's growth?

The SME segment  is an emerging sector in the Indian prospective. If the banks can provide a credit help to these sectors it has the potiential to develop globally. The Government of India has provided various credit policy, which the Banks can provide a credit flow by easing the access of bank credit and  rationalising the loan cost for the SME sector. This would help them in financing the small and medium enterprises to increase their productivity and help in further trade.

As said, there has been witnessing growth in the exports and the scope for these SME's has increased. However, SMEs face certain risks on the export front which include country-specific risk and foreign currency risk due to fluctuation in value. These result in a prolonged delay in getting payments for the shipments depriving the exporters to close the sale and claim export benefits in some cases from the Government in time. In such cases, Banks can step in to assist exporters and in some cases discount the payments upfront.

Sor far Banks were lending for the SSIs and now SMEs. Lending is an essential job of Banks and partial Credit Gurantee provided to them for SME lending may further boost this sector.

This may not mean that others, who may have a role to boost this sector will sleep. For example, roads and communication should be Ok - land and water should be provided. Sufficient electricity might be supplied. That ' licence raj ' has gone, this sector may not face any problem in getting necessary in-puts. The country should be SME friendly and Big Business-houses should become a patron for them. There may not be any occassion that Big Industry is trying to choke them by delaying their payments - mostly observed to happen.

In a word, a "wholeistic approach" might be adoped for development of this sector. When service sectors like IT, BPO etc getting so many encouragements, SMEs should equally get attention from all to make India a good global destination for manufacturings as well ( like China ?)

In my view, on the technology front, the introduction of RTGS (Real Time Gross Settlement) will be highly helpful to exporters. However, many exporters are not using this facility and a lot of education is needed. The country-specific risk is due to the pressure on foreign exchange reserves in that particular country to which exports are made and the country might impose restriction on payment overseas because of depleting forex reserves. In such cases, Banks can step in to assist exporters. SIDBI in association with Indian Banks' Association can initiate necessary steps to collect and pool common data on risks in each identified clusters and develop an IT-enabled application, appraisal and monitoring system for small (including tiny) enterprises.

Banks are already extending credits to SME's, like expanding credit upto 1Cr for industries on very lenient conditions.

For such advances banks do collect all the information regarding what equipments/machinery were installed.

If banks can create a data base of equipments/technology/experts for a particular industry, it can be a win win situation for the entrepreneur & so for the banks.

The only way Banks can help anyone is reducing the Lending rates.

It is matter of aligning the goals of the Citizen with the Economic prerogatives. For this if the Banks have to be purposeful they need to reduce the lending rates. Otherwise they can strangle a growing business and will be difficult to revive them back in the short run when they reduce it later.

Now the rates are fixed and the growth of the economy is targeted with the general realities abroad. This is a political question whch the leaders has to address. If they feel it is unethical to grow when everybody else is stagnating or are slowing down in growth then the Banks cannot do anything about it. This is the problem with Socialistic mind sets where as in free market banks fix their rates according to general goals of the citizen whic is  the growth of Industries.

Hi everybody,

Govt should give full support and encouragement to SME"s. Incentives and concessions for exporting SME products should be made simpler. Infrastructure upgradaton should extend to all cites and not restricted to major cities.