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Interim Budget 2024: MSMEs demand FM’s attention to resolve bank loan ratings system issues

The MSME sector in India, which accounts for 30% of the country’s GDP and 50% of exports, wants the government to address an “unease in banking” for small businesses.

Finance Minister Nirmala Sitharaman should resolve this issue in the interim budget, says the Federation of Indian Micro and Small & Medium Enterprises (FISME).

Anil Bhardwaj, secretary-general of the federation, says the bank ombudsman scheme is ineffective and appears to favour the lenders over the customer. A big weakness is that it does not make it mandatory for the ombudsman to deliver reasoned or speaking orders. Because of this, most cases are just dismissed or decided arbitrarily without giving reasons, he says.

FISME also highlights that banks levy a foreclosure charge on loan prepayment or when a borrower wishes to switch banks because of unsatisfactory services. These charges, ranging from 2-4%, contradict the RBI’s Code for Micro and Small Enterprises (MSE), which advises against such penalties, says Bhardwaj.