New Delhi, Dec 28 (KNN) MSME sector is less prone to cyclicality as it has good collateral with usually promoters protecting their businesses well as it is their bread and butter, said the YES Bank Managing Director and CEO Rana Kapoor.
“India has a fantastic opportunity in the micro and small and medium enterprises (SME) space. There is a big vacuum and we are taking steps to become a good bank to the sector,” Kapoor told Indian Express.
“We believe it is less prone to cyclicality has good collateral and usually promoters protect their businesses well as it is there bread and butter business,” he added.
Last week, the private sector lender, YES Bank, had raised USD 150 million from the International Finance Corporation (IFC), Washington, a member of the World Bank Group.
“The loan will be used by YES BANK to scale up its small and medium enterprise loan portfolio,” YES Bank had said in an official statement.
“We have just secured a USD 150 million loan from the International Finance Corporation, Washington. It is an A&B loan and its end use is for SME financing,” The bank chief said.
“In 2014, we will also take steps to build our retail networks, retail banking as well as agri business,” he said.
Last year, IFC provided a USD 75 million loan to help YES Bank expand its network to reach underserved people, small businesses, and agricultural borrowers in India.
There are about more than 30 million enterprises in the MSME sector which is considered an important vehicle of faster, sustainable and inclusive growth of the Indian economy.
After agriculture, the sector provides the second largest source of employment to more than 70 million persons.
It contributes almost 45 per cent of the manufacturing output and around 40 per cent of the total exports are by this sector.
The sector faces a number of issues and challenges like lack of credit, high cost of credit, delayed payments, procurement of raw materials at a competitive cost, lack of access to global markets, inadequate infrastructure facilities, low level of technology modernization, lack of skilled manpower marketing, and revival of viable sick units.
Further, in his interview with the Indian Express, Kapoor said that “there is a real shortage of banking entrepreneurs in the country as a lot of bankers have become verticalised in the last 20 years. Also, the regulated licensee must look at it as a primary business and it can't be a side business.”
The financing package of USD 150 million from IFC to the India’s fourth largest private sector bank includes USD 45 million provided through IFC's new co-lending programme, in addition to its own account loan of USD 60 million — both for a period of seven years.
Another USD 45 million syndicated loan has been provided by Intesa Sanpaolo, Bank Muscat, Doha Bank and AKA Frankfurt for a tenor of two years. YES Bank has swapped the loan with the Reserve Bank of India (RBI) through the concessional swap window offered to banks.