Page 31 - Banking Finance May 2019 N

ARTICLE

NPAS IN MSME

SECTOR MSME -

SUGGESTED

RECOVERY

STRATEGIES

Introduction: Today, banks carry the high and increasing level of NPAs in
the MSME sector. Hence to offer suggestions to step up
The development of MSME sector in India is crucial since it
is known for employment generation particularly when large the credit flow to the sector and also to reduce the level of
NPAs therein, it calls for analysis of bank finance to MSMEs
young and educated population is on look-out for on one hand and NPA portfolio of the sector on the other
employment. Appreciating this felt need, the Government and review of the recent initiatives taken by the
has taken several initiatives for skill development during the
Government and Reserve Bank of India (RBI) and offer
recent past so that the pace of self-employment is scaled
suggestions for banks to offer the need based credit and
up significantly, besides encouraging existing enterprises gain
reduce the level bad loans in the sector. To start with, let
further strength. us study the present credit flow to the sector.
Fortunately, response to such initiatives from the existing Inadequate credit supply to MSMES:
and potential entrepreneurs is picking up. But the sector
continues to suffer from adequate bank finance. Hence, such IFC/McKinsey Study Report- 2016, estimates that worldwide
MSME population at 420 to 510 million, of which 360 to 440
enterprises are forced to borrow from non- institutional
million alone are in emerging markets. The report also
sources even at exorbitant rates of interest to bridge the
estimates that the formal Small and Medium Enterprises
credit gap, creating a stress on their income generation.
This, in turn, has resulted into loan defaults on their part. (SMEs) contribute up to 45 percent of total employment and
up to 33 percent of national income (GDP) in emerging
About the author economies and these numbers could be significantly higher
when informal SMEs are included. Similarly, the Asia SME
Dr. V. S. Kaveri Finance Monitor-2014 has projected that 96% of all
Retired Faculty, NIBM, enterprises in the Asian region fall under the MSME
Pune category, absorb close to 2/3rd of the working force and

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