Mumbai: Union Finance Minister Nirmala Sitharaman urged banks to go beyond standard loan products and design such offerings where repayments are structured around the unique needs of a particular business.
Speaking at the 37th foundation event of the Sidbi here, Sitharaman said the government's focused institution is for helping small industries can take the lead on this.
"My message to Sidbi and every banker here is that standard products cannot serve non-standard businesses," the FM said, citing examples of how the income generations of businesses vary across multiple activities.
It can be noted that at present, loans are typically given with a monthly repayment, which may be weekly as well in the case of microfinance.
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"A farmer-linked enterprise does not earn every month. A resort does not earn evenly through the year. A garment exporter waits for payment after shipment. A small auto-comp supplier waits for invoice clearance. A woman entrepreneur may have regular transactions yet no property in her name," Sitharaman said.
"Why should all of them be given the same repayment structure?" the FM questioned, asking Sidbi to take the lead to ensure that credit is designed around the business cycle of an enterprise.
The FM gave examples of the plan that she has in mind, pointing out to how credit terms can be different for various industries in Maharashtra.
An agri processing enterprise in Nashik, Satara, or Sangli can have repayments linked to harvest cycles, while a grape processor, turmeric unit or a pulses unit which earns with the arrival of a crop should be allowed a seasonal repayment and off-season flexibility.
Similarly, in the hospitality or the tourism-related businesses in Mahabaleshwar, Matheran or Lonavala, where earnings come in four strong months, repayments should be linked to that cycle, she said.
Even in the case of textile and garment units in an Ichalkaranji or Solapur, credit must understand export cycles, the FM said, underlining that if an order takes 90 days, finance should combine pre-shipment credit, post-shipment support and currency risk protection as well.
"The aim should be to provide right credit for the right enterprise and at the right time for the right purpose," she said.
Sitharaman also asked Sidbi to expand into a market maker and a risk-sharing partner for small enterprises, and not just be a lender for such companies.
She also urged the body to take care of the debt capital requirements for startups.
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There can be far-reaching economic impact of supporting MSMEs, she said, adding that 32 crore Indians are employed in MSMEs.
"If we get the MSME credit right, we get the middle class right. If we get middle class right, we get Viksit Bharat right. It is that direct," she said.
Earlier, Manoj Mittal, the Chairman and Managing Director of Sidbi, said it is aiming to expand the tie-ups with industry associations to 500 in the next two years from the present 105.
Pointing to the expansion in branches to 166 from 96 two years ago, he said the potential of being present in smaller clusters was unknown to Sidbi.
Sanjay Lohia, the special secretary in the Department of Financial Services, said that the government has already infused Rs 3,000 crore of the Rs 5,000 crore in capital announced earlier this year.
