: Private banks will soon gain momentum in disbursing collateralfree loans to MSMEs: Uday Kotak #FinanceIndia #StockMarketNEWS New Delhi, Jun 29 (KNN) Admitting that Private banks have started a little

@StockMarketNEWS Thu 02 Jul, 2020

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Private banks will soon gain momentum in disbursing collateralfree loans to MSMEs: Uday Kotak #FinanceIndia #StockMarketNEWS
New Delhi, Jun 29 (KNN) Admitting that Private banks have started a little slow than the Public Sector Banks (PSBs) in terms of loan sanctioning and disbursals under the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), Managing Director, Kotak Mahindra Bank and CII President, Uday Kotak assured that private sector banks will soon gain momentum in disbursing collateral-free loans to MSMEs.

While speaking at CII Virtual Dialogue on, ‘Strategising the Rollout of Economic Stimulus Package’ on the occasion of International MSME Day, on Saturday, Kotak said, “Private banks have started a little slow but assured that in the next few weeks there will be significant flow of credit from private sector banks under the scheme both in terms of loans sanctioned and disbursed.

Kotak explained that for private sector banks conservatism arises as they need to safeguard the interest of the depositors, whose trust in the private sector is critical for their functioning.

There are two important things for MSMEs to grow and become an integral part of building a new India - higher proportion of risk capital and proper governance, he added.

On the issue of eligibility under the scheme, he said that in view of the revision in turnover limit for MSMEs from Rs 100 Crore to Rs 250 Core, the eligibility conditions should also be relaxed similarly, and CII would be taking this suggestion to the government.

The CII President advised MSMEs to not only depend on banks for accessing credit but also look at other avenues like raising private equity or risk capital.

Such steps will also enable them to get better access to credit from banks at cheaper rates, he said.

He also said that MSMEs need risk capital to grow and CII would help them in strengthening their ‘internal housekeeping’ so that they can get better access to credit at competitive rates adding that MSMEs need to be better educated so that they understand how to access formal credit and what are the requirements to access formal credit.

While highlighting the importance of the sector, the SBI Chairman Rajnish Kumar said that they have vast outreach and play a critical role both in terms of economic activity and employment generation.

Kumar further said that the credit guarantee scheme for MSMEs under the ‘Atmanirbhar Bharat’ will reduce the pain of the sector, which has come under stress in the aftermath of COVID-19 induced crisis.

Commenting on the issue of bank lending to MSMEs, the SBI Chairman said that conservatism, if any, on part of public sector banks arises as the MSME sector is relatively more vulnerable and there exists information asymmetry on part of the lender as well as banking professionals at branch level.