Challenges and opportunities in

MSME Finance.

Revised
This session covers: 
 
1.Definition
 
2.RBI guidelines.
 
3.Government initiative for MSME
 
4.Different support services available for MSME
 
5.Challenges and Opportunities.
 Challenges:

1. Dearth of easy finance and credit instruments.

a. Complex collaterals required to obtain term loans.

b. High transaction costs in imports/ exports.
c. Private Equity funding is difficult to obtain.
d. Banks charge high rates for term loans.
e. Private Equity dilutes control in the Company.
f. Un-standardized project appraisal system for term loans.
g. Cumbersome procedures and delay in fund disbursements.
2. Complicated Regulatory Policies for
starting a business:

a. Absence of common regulatory body,

b. Complicated procedures for setting up
business.
c. No special schemes for start ups.
d. Complex book keeping regulations.
3. Unavailability of modern, affordable technology:

a. Limited interaction between technical providers

and seekers.
b. Absence of ecosystem for technology transfer.
c. Access to modern technology is expensive.
d. Minimal knowledge about upcoming technology
e. Non-availability of e-Governance systems.
f. Lack of effective information system.
g. Lack of funds to support innovation and R&D.
4. Lack of Basic Infrastructure facilities:

a. Inadequate supply of water.

b. Insufficient methods of industrial waste mgt.
c. Inadequate cluster infra reducing competitiveness.
d. Lack of reliable electricity resources.
e. No minimum price for power fixed for MSME.
f. Volatility in prices of basic fuels.
5. Absence of exclusive marketing platforms
and distribution network:
a. Lack of monetary support/ schemes.
b. Limited knowledge about digital marketing.
c. Limited expertise in new age marketing.
d. Not enough trade affairs and buyer seller meets.
e. Losing to large competitors due lack of networks.
6.Inflexible labour laws and availability of
affordable skilled Labour.

a. Retaining talent due to lack of ability to pay.

b. Low productivity of labourers.
c. Common minimum wage policies.
d. Lack of skilled workers.
 Recommendations:
The above issues are based on the recent survey made On the
various units in MSME segment in our country.

a. As Bankers we have role to play in removing the constraints

faced by the borrowers.
b. We can take this Sector as an opportunity to increase our
loan book.
c. Our bank has come out with simple structural loan products like Ind
SME Secure, IB Micro, Doctor Plus etc. which every branch can extend.
d. In view of the high risks associated with high value advances
MSME segment offer simple small product advances which will
increase interest income and make the branches popular in the
operational areas.
Recommendations:
The above issues are based on the recent survey made On
the various units in MSME segment in our country.

e. Wherever possible CGTMSE scheme can be taken to

cover the risk of default.
f. Large number of MSME clusters exist in our Country.
g. The branches situated nearby can approach such
clusters
h. And recommend for products with certain relaxations
to beat competition form other Banks.
Thank You