The Indian Economy is at a cross road. Whilst financial reforms are needed to put in place the necessary framework to spur economic growth there is a crying need for review of the entire lending process by the banking system and orient the same to spur growth of Micro and small enterprises who are prime drivers
Traditionally, the Indian financial system has been oriented towards large corporate lending with a regulation driven priority sector approach to MSMEs – A regulatory imperative rather than a business imperative.
Inadequate staff background in understanding MSMEs, their businesses, cash flow vulnerability and excessive focus on collaterals has led to excessive caution in lending to MSMEs at all times who lack collaterals. The MSE sector has therefore been largely underserved by the financial system