Mundra cautions Centre on loan guarantees for MSMEs

“NPAs are not a sin. They reveal the difficulties faced by the small and medium sector units and banks should handhold them rather than change regulations,” said Mr S.S. Mundra deputy governor, RBI.

Pointing out the weaknesses of the SME sector, Mr Mundra said they should differentiate between cash flow and profits, keep accounts and records and share their problems with bankers immediately, so that their loans don’t become NPAs.

He was speaking at the launch of the 18th Indi MIicro, Small and Medium Enterprises Report 2015 by the World Trade Centre and the AIAI, an association of small sale entrepreneurs.

As the government is planning to raise the funding caps under the credit guarantee fund trust for micro and small enterprises (CGTMSE) scheme for small businesses, Mr Mundra said that industry bodies and other stake holders should join the TMSE.

This could bring in discipline in payment by large corporates to the SMEs The major problem of SMEs is delayed payments though now the RBI has taken measures to address this problem. Mr Mundra said 94.9 per cent of the MSME sector consists of micro enterprises whilst 4.39 are small enterprises and a mere 0.1 per cent are medium enterprises so it would be wrong to lump them together as their problems and demands are very different.

He said that the RBI had asked the Indian Banks Association to design special products to create capacity building.

Mr Vijay Kalantri of AIAI said that it is only the SMEs who can make the Make in India programme a success if they are given the finance.