Gross NPAs of MSMEs better than large companies, RBI's Mundra says

 : Bad loans of micro small and medium enterprises sector as a whole is tad better than the total bad loans of large companies in the banking sector offering more opportunity for banks to expand loans, SS Mundra, Deputy Governor, Reserve Bank of India said Friday.

  Even within the MSME sectors, the gross NPA of micro sectors, or of small companies, is slightly lesser than that of the small sector industries and the ones bigger than them, Mundra said at a function.

  "Banks to be sensitive towards the lifecycle needs of their MSME clients and develop innovative products that are suitable to their unique and seasonal requirements for working capital and for capital expenditure purposes," the deputy governor said.

  

   Pointing out at the various initiatives taken by the Reserve Bank and the Government of India like Trade Receivables Discounting System (TReDS) and rehabilitation of sick SMSMEs the Deputy Governor hoped that these will go a long way in supporting and nurturing the sector.

  While speaking about the efforts that needed to be taken to help revive the MSME sector in the country, Mundra stressed on the need for an exchange platform in the banking system which trades in the MSME sector.

  "A paradigm shift in financing of micro, small and medium Enterprises (MSMEs) will also happen as and when new Small Finance banks are licensed. These will make the financing of MSMEs more competitive in the coming days," Mundra said. "Banks will be able to face this competition only if they are more sensitive to the needs of the small entrepreneurs."

  Micro, small and medium enterprises (MSME) contribute nearly 8% of the country's GDP, 45% of the manufacturing output and 40% of the exports. They provide the largest share of employment after agriculture.

  "A very important thing which is yet to come into existence within the priority sector guidelines and which would be very very relevant and important in banking sector community is the " trades"- the exchange on which the trade receivables of MSME can be traded- this is work in progress," said the deputy governor. "We have received seven applications in RBI for setting of trade."

  In order to revive the MSME sector in the country the banks can take use of e-commerce as well, the deputy governor said.

  "With the e-commerce sector growing so wide, the small units can be helped by this as it allows them to become vendors to these e-commerce companies," Mundra said.