“Government and the Reserve Bank of India (RBI) must work with a vision to address the credit needs of Micro Small and Medium Enterprises (MSMEs), which is a vibrant sector of the Indian economy. The most worrisome fact is that the share of bank credit to the MSMEs has declined from around 12% some years ago to 8% in recent years. The key policy priority before the government and RBI is to simplify the norms and procedures for sanctioning loans to MSMEs and have faith in the repayment capacity of such enterprises. MSMEs need timely access to credit at reasonable cost,” said Vijay Kalantri, Vice Chairman, MVIRDC World Trade Centre Mumbai in his welcome address at an interactive panel discussion on ‘Trade Credit: Its Relevance to Global Value Chains in Context to Indian MSMEs’ at World Trade Centre Mumbai. The panel discussion was organised by MVIRDC World Trade Centre Mumbai and sponsored by Deutsche Bank.
A Knowledge Paper on “Trade Credit: Its Relevance to Global Value Chains in Context to Indian MSMEs” prepared by MVIRDC World Trade Centre Mumbai was released on this occasion.
Ritesh Singh, Group Economist, Raymond Ltd., while moderating the session, emphasized on innovative and tailor-made banking products in trade credit that would serve international markets in Africa.
In his remarks, Arun Sehgal, Chairman, Chempro Pharma Pvt Ltd, said “India is lagging far behind European countries on adoption of digital technology by banks and other financial institutions for processing trade credit and extending innovative factoring services. India needs to integrate with international standards to upgrade its trade credit products. In order to promote factoring services for import and exports, factoring service providers in India must accept third party quality certification, as is the case in Europe,”
Dr. Sunjay Koyande, Director, CCRT Laboratories stressed on issues confronting the MSME sector in accessing trade credit. He pointed out that the existing documentation procedure for accessing trade credit creates many hassles and it exerts a lot of stress on MSMEs.
In order to ensure access to institutional credit, Anurag Mishra, Regional Lead – Asia Pacific Financial Institutions Group, Global Trade Finance & Supply Chain Solutions, International Finance Corporation suggested that MSMEs must improve their book keeping practices, adopt sound financial disclosure norms and so on.
Saurabh Jain, Vice President, Head Business Banking Products, Private Wealth & Commercial Clients – India, Deutsche Bank pointed out that the balance sheets of MSMEs don’t reflect their true business value as considerable amount of their transaction is conducted by cash. Therefore, while the business value of MSMEs has increased, it is not reflected in the balance sheet, thereby restricting their ability to access bank credit.
Lokesh Kumar, Deputy General Manager, EXIM Bank stated that EXIM Bank is supporting exporters through buyers credit facility, which is a non-recourse funding and which completely eliminates payment risks for exporters. EXIM Bank also offers credit support to MSME exporters under its Global Trade Finance Programme.
Samarth Mathur, Product Manager, Trade Finance, Kotak Mahindra Bank explained some of the constraints faced by banks in extending credit to MSME sector.