RBI asks banks to consider MSMEs while extending credit

While criticizing  the banks for not extending financial assistance to the micro, small and medium enterprises (MSMEs), deputy governor of the Reserve Bank of India (RBI),  R Gandhi has asked the lenders to consider the working dynamics of this sector while extending credit, reports media. 

"The MSMEs get a raw deal from the banks. The credit flow to the MSMEs are not commensurate with their contribution to the economy," Gandhi said while addressing the ICC Banking Summit in Mumbai on Saturday. 

He said that MSMEs serve the large corporates and their cash flow gets lumpy as they have to depend on payments. "Banks need to consider this (matter)", he said.

Gandhi said that there was need for more variety of banks in the country.  "We intend to give licenses to set up niche banks in the country. These licenses will be given on tap", he said.

"The RBI will soon come out with policy guidelines in differentiated banking licenses within a short period of time", Gandhi told reporters on the sidelines of summit.

On-tap licensing means the RBI window for granting banking permits would be open through the year. The policy guidelines would be put on the public domain first for inviting suggestions from the stakeholders after which applications would be invited, he said.  

The RBI recently awarded licenses to micro-finance institution (MFI) Bandhan and finance major IDFC for setting up full-fledged banks, report said.