Credit and Finance for MSMEs: Improper maintenance of financial statements, high cost of processing MSME loans relative to their loan size, lengthy loan processing exercise, lack of technical understanding etc. were among the key challenges in MSME lending.
Credit and Finance for MSMEs: Raising capital from banks continues to get easy for small and medium businesses (SME) as former reports easing of credit standards (guidelines to determine whether a borrower is creditworthy) for SMEs since first half of 2018, according to the 10th round of the FICCI-IBA Survey of Bankers for H2 2019. 44 per cent respondents (banks) in the survey said credit standards have eased — this is up from 5 per cent in H1 2018 to 14 per cent and 17 per cent respectively for H2 2018 and H1 2019. Importantly, the respondents’ share who reported no change in the standards declined from 68 per cent in H2 2018 to 78 per cent in H1 2019 and 44 per cent in H2 2019.
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However, according to the RBI February bulletin, growth in bank credit to micro and small enterprises remained contracted till December in the current FY. Since April when the credit growth contracted at 0.1 per cent, the trend has continued till December during which the growth rate shrunk 0.5 per cent. The December bank credit to micro and small businesses was Rs 10.61 lakh crore — 5.7 per cent up from Rs 10.04 lakh crore in the year-ago period.
Source: Financial Express
