They Are an Angel to Small Businesses

SBI often incubates a company and nourishes it to a particular growth stage, explains Narayanan. When the account becomes novel, there are enough private sector banks and NBFCs ready to cater to them. “So, in my opinion, these players don't expand the pie, instead, they only churn the pie. If you look at PSBs, NPA in this segment will be 10 per cent and above, while for the private sector and NBFCs it is less than 3-5 per cent. Additionally, we have also incurred the cost, bringing them to a level that they are no longer new to credit and have a transaction history but the portfolio is churned in favour of NBFCs and private sector banks,” he points out.

The Challenge

If there are 60 million MSMEs in the country, how do you spot the opportunities? There are about 65 lakh MSMEs registered with Udyog Aadhar while a little over one crore companies have GST registration. So, how does a lender track the left outs? “I cannot onboard them on a digital platform without touching base with them manually and the problem is much larger than this.

SBI has 25,000 branches and we cannot have a uniform system of appraising MSMEs because each individual will have his/ her own prejudice. Secondly, there is hardly any transaction history for these smaller units as they deal in cash and hence, there is no audit trail.

And if at all they have a bank account there is no credit history or transaction history, therefore, there is no credit bureau record or track or a score. These are the challenges which we face to onboard new to credit SMEs,” says Narayanan. The methodology of assessment for a INR 50 crore loan account and INR 50,000 account cannot be the same.