Page 34 - Banking Fiannce March 2018

ARTICLE

Definition:-

Segment Enterprises engaged in the manufacturing , Enterprises engaged in providing or rendering
production, processing or preservation of goods of services
Micro Is an enterprise where original investment in plant Is an enterprise where original investment in
Enterprise & machinery does not exceed Rs. 25 Lac. equipment does not exceed Rs.10 Lac.
Small Is an enterprise where original investment in plant Is an enterprise where original investment in
Enterprise & machinery is more than Rs.25 lacs but does not equipment is more than Rs.10 lacs but does not
exceed Rs. 5 Crore. exceed Rs.2 Crore.
Medium Is an enterprise where original investment in plant Is an enterprise where original investment in
Enterprise & machinery is more than Rs. 5 crore but does not equipment is more than Rs 2 crore but does not
exceed Rs.10 crore. exceed Rs. 5 crore.

The above investment in Plant & Machinery and investment in Equipments should be taken for Core P&M and
Equipments.

The traditional lenders to the sector were private players The poor guys did not mind this burden too and started
(Money lenders) before nationalization of Indian Banks. turning towards the Non Banking Financial Companies for
Limited output was expected from tiny industries and their financial needs. Since the demand of credit in this
individual entrepreneurs. The concept of small scale industry sector was very high and Supply was very low, the gap
came into existence as this was the sector not well attracted the new generation of Tech Companies. The
organized. Nationalized Banks started funding with the target group for the Fin Tech companies was the excluded
pressure of Government, but with a lot of paperwork and portion of MSMEs.
formalities. The hesitation of visiting banks with the
entrepreneurs was still there. Why Fintechs Targeted MSMEs?
Y The sector is still considered as a less travelled road.
RBI, the regulator of banks directed all the Scheduled
Commercial Banks to prioritize their lending to the small and Y Since Fintech is on the rise in our country and has both
needy people of the society who are engaged in the demand and supply side impact for Indian financial
activities defined above in addition to financing the sector
Agriculture sector. Sympathy was shown at every level. The
hurdle in the way was of collaterals and guarantees to cover Supply side - Changing business models, driving efficiency
the risk of financiers in case of default of repayment. GOI and outreach.
and SIDBI found the way to this by establishing a Trust
named as CGTMSE ( Credit Guarantee Trust for Micro and Demand side - Access and use of financial services.
Small Enterprises ) to guarantee the Credit of MSEs. Medium
Sector was not covered. Indian Fintech is largely a story of payments. Let us
understand the importance of Fin Tech. The target group
The teething problem with the trust was of systems and of Fin Tech is comparatively wealthier and middle class
procedures to be followed by the MLIs (Member Lending customers of Urban and metro cities, which may be re
Institutes). However, the Trust was a ray of hope at least planned with the interest shown by the rural and semi urban
for micro and small enterprises. RBI also mandated that no customers.
collateral and third party guarantee will be insisted for the
loans up to Rs.10 lakhs. The pace of lending was still slow The first time entrepreneurs facing difficulties with the
by the banks. NBFCs took advantages of the situation and existing banking system or the unbanked population can gain
started funding at a higher rate of interest. more from Fin techs.

34 | 2018 | MARCH | BANKING FINANCE