Sitharaman mentioned that while SIDBI was predominantly doing indirect finance as mandated and it reached out to the MSMEs through Banks, NBFCs, MFI etc., it has now felt that the financial needs of MSMEs are dynamic and need to be met in a timely and cost effective manner.
SIDBI’s credit to MSMEs: Inaugurating a new branch of Small Industries Development Bank of India (SIDBI) in Coimbatore on Tuesday, Finance Minister Nirmala Sitharaman noted that there is a requirement to increase SIDBI’s share in direct finance in credit to MSMEs to meet growing need of capital of such enterprises.
According to a release by SIDBI, Sitharaman mentioned that while SIDBI was predominantly doing indirect finance as mandated and it reached out to the MSMEs through Banks, NBFCs, MFI etc., it has now felt that the financial needs of MSMEs are dynamic and need to be met in a timely and cost-effective manner. “With this background, SIDBI started direct finance which is around 10 per cent of total credit to MSMEs. However, the 10 per cent of the credit has its relevance and needs to be increased to 20 per cent and further,” the release said citing Sitharaman. The minister further informed that SIDBI is currently fully digitized and caters to the varied needs of the MSME with its innovative products.
Sitharaman also noted that MSMEs are a vital part of the Indian economy and have made significant contributions to the country’s socio-economic growth. Since MSMEs make a crucial contribution to India’s GDP, are the second-largest employment provider, and have a significant contribution to the overall exports of the country, there is a need for providing timely and adequate credit to MSMEs by banks and financial institutions, she added.
The minister further called for a ‘holistic manner’ to address issues such as delayed payment, collateral, etc.
In August this year, Sitharaman had also urged banks to map regional rural banks (RRBs) with MSME clusters and put greater thrust on increasing the network of rural branches in cluster areas identified by the MSME Ministry, FE Aspire reported.
According to the latest data from the Reserve Bank of India (RBI) on the sectoral deployment of bank credit to various sectors, the gross bank credit deployed in August 2023 to MSMEs under priority sector lending was Rs 21.26 lakh crore, up from Rs 20.86 lakh crore deployed in July. The August deployment was 14.2 per cent of India’s Rs 149 lakh crore non-food credit during the month.
Meanwhile, SIDBI noted that it has more than 90 branches and is expected to cross over 100 shortly. The bank’s Chairman and Managing Director Sivasubramanian Ramann during the launch of the branch said that SIDBI has fully digitized its lending processes, which enables extending financial assistance in 48 hours.
SIDBI had also recently launched a fully automated Straight Through Process to sanction loans up to Rs 1 crore online within a few hours.
