SME Times News Bureau | 08 May, 2014
High economic growth is the best solution to narrow the differences
in interests and prospective between entrepreneurs and bankers when it comes to
SME financing, said Sunil Kumar Sinha, Director - Public Finance &
Principal Economist, India Ratings & Research, a Fitch group company, in an
exclusive e-mail interview with SME Times.
"The best remedy is higher GDP growth. It has been observed
that during the high growth phase typically the SME sector thrives, enjoys
better access to funds and bank also encounter lower NPAs," Sinha said.
"It is like a chicken and egg situation. In a competitive
world on the one hand banks would not like their NPA's to bloat and on the
other SMEs would like better access to funds to remain afloat," he added.
Sinha also pointed out that major portion of bank financing
provided to small and medium enterprises is under significant stress.
"As we are currently passing through a growth slowdown India
Ratings & Research (Ind-Ra) has found that 46.3% of the bank loans provided
to SMEs is under significant stress," he said.
The economist also stressed on more effective execution and implementation
of the existing government policies and schemes designed for SMEs.
"There are enough policy and schemes in the country to
support and nurture the SMEs. What is absent is its proper and effective
execution and implementation. By this we are not suggesting that there is no
need to modify and improve the current policy environment or formulate new
strategy to support SMEs. All we are saying is that we often end up making more
policies and strategies and schemes but overlook the most crucial part which is
effective execution/implementation," he said.
Sinha is also of the view that India needs to focus on
removing bureaucratic and infrastructural hurdles. These hurdles pinch SMEs
more than they do to the large enterprises. They enhance transaction costs and
erode the competitiveness of SMEs. The economist also viewed inadequate infrastructure, limited access to
international markets, technological obsolescence and poor exposure to social
and environmental risks as some of the other major problems facing the Indian SME