Bringing MSMEs back on the growth trajectory

This is a special feature as part of India on the Move Series (Season 4), an initiative by Standard Chartered Bank and CNBC-TV18

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Published: Jun 16, 2021 05:00:28 PM IST

The revival of the MSME sector, which contributes significantly to the country’s GDP and employs close to 100 million people is a priority amid the turbulence unleashed by the pandemic. The ecosystem entrusted with this sector’s growth is actioning necessary steps to bring it back on track. Mridu Bhandari from CNBC-TV18 gets into a candid conversation with Manish Jain, Managing Director & Co-Head, Corporate, Commercial & Institutional Banking, India, Standard Chartered Bank, Ajay Thakur, Head of BSE SME & Start-ups and Sankar Chakraborti, CEO, Acuite SMERA Group.

41% of the Rs. 3 lakh crore package disbursed under the Atmanirbhar Scheme

Manish Jain allayed the concerns regarding disbursal of funds where he delved into the processes that banks are adopting to aid MSMEs in this period of trial. Standard Chartered Bank in particular is ensuring the working capital needs are addressed on priority as per RBI’s mandates. Disbursements sanctioned under the Atmanirbhar Bharat scheme commenced in July 2020, and Manish explained that “Rs. 1.9 lakh crore out of the Rs. 3 lakh crores were sanctioned and about Rs. 1.4 lakh crore was disbursed initially”. Manish is positive that the gradual uptake in the economy will refine the disbursals which currently stand at 41%.

Accelerated Tech Adoption

Quoting a recent research, Manish believes that India is certainly at an inflection point with regards to digitalization, he further shared that 30% of the MSMEs adopted some sort of e-commerce functionality or a business website, and more than 50% of MSMEs have transitioned to executing business through Video Conferencing. He stated that Banks have proactively ensured the majority of routine functions have been digitized to drive efficiencies that provide seamless execution of trade and non-trade transactions.

Business Continuity Planning and Equity play

Ajay Thakur firmly believes that equity is an important driver for small, mid, and large enterprises. The eight-year-old platform curated by NSE assists SME promoters in entering equity markets and eases compliance procedures involved in the listing of an enterprise. He opines “In the COVID phase, we saw the listing of almost 15 companies who have raised almost Rs. 100 crores through the stock exchange”. To encourage the equity culture among MSMEs, NSE is taking proactive steps to organize webinars, collaborate with Government SME ministries, and other players. Ajay emphasized that getting listed is a crucial move, as companies in this sector will get good market visibility, strike a balance between equity and debt thereby reducing cash flows and bringing down interest rates.

Expanding the role of credit rating agencies

Shankar cites that companies with decent credit ratings have sustained in the aftermath of the pandemic, he further adds that they were in a better position with regard to raising and management of funds. He feels that the technology adoption by MSMEs is giving them a competitive edge, scaling down costs and is a positive development for the growth of this sector.

Supply Chain Financing

Banks are poised to play a key role in this emerging area which will open up avenues for SMEs to leverage global value chains. Standard Chartered is already devising mechanics based on data analytics and machine learning to observe the transaction patterns and predict incremental requirements. This will enable insights into risk planning and improvisations on the credit delivery front.

In conclusion, the panel unanimously agreed that the pandemic is the best time for MSME businesses to introspect in order to emerge stronger and forge ahead with renewed vigour and optimism.