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Spend most of our time looking for finance; MSMEs tell RBI at townhall meeting

New Delhi, May 3 (KNN) Most of the MSMEs face problems of finance in general and institutional funding in particular while entrepreneurs spend 70 to 80 per cent of their time in dealing with finance related matters, representatives of small industries in west Delhi area of Badli told RBI at a townhall meeting, an initiative of the central bank along with the industry body FISME.   

The Reserve Bank (Delhi Region), with the support of Federation of India Micro and Small & Medium Enterprises (FISME), held its first town hall meeting yesterday with the Badli Industries Association which was chaired by the General Manager, Rural Planning and Credit Department (RPCD), RBI, Sonali Sengupta.

The main objective of the meeting was to discuss the grievances and feedback that the small entrepreneurs face with the public as well as private sector banks.

“As you are aware, lending to the MSME sector comes under the priority sector lending, therefore RBI is keen to know the difficulties, grievances or suggestions that the entrepreneurs have,” Sengupta said.

“Taking the learning from the meeting, more meetings will be organised with other industrial areas, she added.

President of the Badli Industrial Estate Association, A K Kaul said that, “Though this industrial estate is one of the oldest in Delhi, and its administrative building has a provision for a bank, unfortunately, no PSB or private bank has come forward to take the advantage of it.”

The RBI official assured them that she would look into the matter.

Some of the other issues raised during the meeting were about time taken in receiving payments from abroad; higher valuation charges; long and cumbersome paperwork in getting finance, insistence on collateral security; higher rate of interest; higher cost of financial services etc.

“The banks invariably insist on a collateral security in spite of clear provisions for collateral-free loans for an amount of up to Rs One Crore,” BIEA highlighted.

“Normally our members are either not aware of this provision or even if they are aware, the banks discourage sanction of such loans,” it added.
The association also said that the limit of Rs 1 crore set for collateral free loans should be increased to Rs 5 crore as it is not in tune with the present day economics of scale.

The entrepreneurs also dwelt on the tax regimes saying that they were too complicated and high.

“MSMEs which are in real need of funds at low rate of interest, are charged anything between 13 to 16 per cent interest, which not only makes their products and services more expensive in the internal market, but also uncompetitive in the global market,” BIEA said.

“Rationalization of the interest rates and bringing them closer to the international funding rates is, therefore, an urgent need of the MSME sector,” it added.

Replying to the issue of higher valuation charge highlighted by some entrepreneurs, SBI official said that the valuation charge for the property is only Rs 1500 and in case if more money is charged, the issue should be immediately reported to them.

Meanwhile, the bankers were of the opinion that in several cases of SMEs, the accounting is unorganized and therefore giving credit becomes an issue.

Some of the other officials present at the meeting were Assistant Managers from Canara Bank, Oriental Bank of Commerce, State Bank of India, Punjab National Bank, ICICI Bank, SIDBI etc.

General Manager of SIDBI, Manoj Mittal clarified the doubts of the industrialists with regard to the schemes like CGTMSE, CHDSME, CLCS etc.

He also said that SIDBI has engaged the services of three retired bankers who have been visiting associations and advising them about credit.

Canara Bank AGM Dinesh Khandelwal said that the bank organized several meetings with the MSMEs but did not get a good response due to low turn outs.

Some of the measures that BIEA suggested for the bankers during the meeting was to address issues such as – increasing direct interaction with the MSMEs; making MSMEs a part of the policy making; opening MSME specific bank branches in all industrial areas etc.