On the occasion of International SME Day, TheSMEIndia conducted a webinar discussion with top industry experts to understand the pain points in the industry and the ways to emerge from the challenges induced by lockdowns due to Covid-19 pandemic and withered demand.
The panelist included top voices of the industry – R Gopinath Rao, Dy Director, MSME Development Institute, Government of India, Dr J R Bangera, Member of MSME Board, Ministry of MSME, Government of India and Suryakant Sawant, GM – MSME & Retail Credit, Bank of Maharashtra.
According to Dr Bangera, The first wave brought setbacks to SMEs and then business picked up followed by slowdown and later we saw the second wave coming which led to scattered lockdowns scattered across states. Almost 20% of SMEs are in a tough situation even though after liquidity support being extended some places demand support is not being felt.
Job loss due to migration has also had an adverse effect on the ecosystem. Adequate technology adoption in development of institutions like ITI, etc. has not happened.
Dr Bangera strongly feels the R & D element is missing from the ecosystem.
He said, “There are so many R&D institutions across sectors and industries but the linkage between these R&D institutions and SMEs is not there and this is the time where there are technocrats and experienced entrepreneurs’ skills can be utilized. We also expect rationalization of schemes as many are redundant. Today finance is not only the criteria but there are other criteria like ease of doing business and other industry aspects. Government should push linkage between R&D Institutions and large companies and develop products and services.”
CIBIL has been a point of contention as it truly doesn’t reflect the credit score due to various reasons. Dr Bangera said, “CIBIL scoring is important and it has goofed up a lot of times where accounts have been closed yet reporting happens by lenders. We have requested the MSME Ministry to take this issue up and explore if it can be disbanded and the incorrect score is affecting MSMEs.”
He stressed upon the urgency to delink the micro enterprises and make it extremely conducive for them to do business and help them with whatever best support the institutions can provide.
Dr Gopinath Rao to quite an extent concurs on similar lines of providing impetus to R&D.
Dr Rao said, Linking the SME and R&D Department is important, earlier we had an ancillary development institute where we used to have ancillary development programmes to link large scale industries to small scale industries. Now the concept has gone and open challenges are emerging in the ecosystem. MSME Ministry has been pushing a lot of schemes beyond liquidity enhancement pushed by banks.
According to Dr Rao the focus should be on prioritizing demand as it has come down drastically and ensuring ease of doing business. It can be done by more digital adoption, adding portals, linking different data points at a single access making it easy for entrepreneurs to not run pillar to post to get things done.
Dr Rao touched upon how funding patterns have evolved in forms like PSB Loans, TReDS, etc. which ensure funds keep moving.
On skill development, Dr Rao said one of the challenges has been linking the talent to the requirements of industry. The Ministry of Labour and Ministry of MSME have together identified areas and taken up cluster approaches to push R&D and manufacturing.
The webinar session also touched upon how a banker views the MSME space. Suryakant Sawant, GM -MSME & Retail at Bank of Maharashtra Sawant said, “MSMEs are growth engines for our economic development, we call these SMEs as the nursery of entrepreneurship. Contributing nearly 8% of India’s GDP and 40% of Manufactured output. As far as the finance sector especially PSBs are concerned, this sector is important to provide financial assistance.”
He touched upon how changes in definition of MSMEs have broadened the scope, PSB59 giving in-principle approval, TReDS, GeM portal initiatives are ensuring much support is given to the MSME ecosystem.
Sawant said, “The previous era where MSME units were doing traditional business and adoption of technology was not seen but in the recent past because of some changes in circumstance these people have been forced to enter and adopt technology ultimately helping them. The impetus has been on faster decisions as MSMEs have been keen on expeditious finance because their production and delivery depends on large OEMs and these have scheduled time-lines and any delay hurts in payments.”
According to Sawant, MSMEs need to focus on adopting technology and banks have been becoming liberal to lend to MSMEs. Defaults seen in CIBIL for amounts less than Rs 50,000 are not really seen as default as there could be some problems due to delayed card payments, rectification of scores etc.”
PSBs are focused on micro-units as these contribute a lot and are unorganized units; we intend to handhold them towards formalization, said Sawant.