Showing posts with label Raghuram Rajan Restructuring and Rehabilitation of MSMEs. Show all posts
Showing posts with label Raghuram Rajan Restructuring and Rehabilitation of MSMEs. Show all posts

Tuesday, August 9, 2016

MSMEs on the Roller Coaster
Unhelpful Banks and Less Understood Regulations
B. Yerram Raju and K. Manicka Raj*
In a recent address RBI Governor Raghuram Rajan said: “A Banker who lends with the intent of never experiencing a default is probably over-conservative and will lend to too few projects, thus hurting the growth.” In the same vein he added: “Indeed, sometimes banks signed up to lend based on project reports by the promoters’ investment bank (in the case of MSMEs chartered accountants), without doing their due diligence.”

There is a total mismatch between the banks understanding and RBI's intentions on the guidelines issued in respect of MSME financing , follow up and useful implementation of the various schemes. Because of accumulation of NPAs banks seem to have lost their sense of judgement and MSMES are the victims and the SARFAESI ACT 2002 has become very handy. Even in the best of times banks did not revive or restructure small scale industries more than 1.5 percent of their own assessed potentially viable enterprises as revealed by the RBI Annual Reports.