Banks Must Move From Asset-Based to Ideas-Based Funding of MSMEs | SupportBiz

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Banks Must Move From Asset-Based to Ideas-Based Funding of MSMEs

 
Enterprises come up with financially viable proposals that can attract the banks

Kolkata: India’s micro, small and medium enterprises need to get more support from banks and financial institutions though for such a change, it would require that these enterprises come up with financially viable proposals that can attract the banks, a top official of the central government has said.

S. N. Tripathi, the Additional Secretary and Development Commissioner at the MSME Ministry said enterprises require financial support to set up business and since credit is not easy for them, the banks need to step in and help them acquire funds through viable proposals.

India’s largest bank, State Bank of India (SBI), has set up a special division called InCube Branch in Bengaluru to support startups and other enterprises seeking financial support. The branch provides banking support plus other services on a free and paid consultancy model.

He was speaking at the 7th National Conference on MSME Financing and Strengthening MSME Linkages’ organized by the Indian Chamber of Commerce. The official underscored the need to generate viable proposals that have the potential for growth and future sustainability.

The official further described the MSMEs as the backbone of India’s economic growth and highlighted government schemes that have been put in action from time to time towards ensuring robust growth of these enterprises.

He lamented the fact that most banks preferred to give asset-based loans and not those based on sound financial proposals. If banks were to focus more on funding sound proposals, good businesses would get established and also ensure that the bad debts reduce.