Kolkata,12 May(HS): As there is a perfect correlation between the availability of sufficient liquidity in the Banking system and low-interest rate regime, extending credit to the MSMEs is not the only solution, since it will destroy the leveraging power of the SMEs.
From the macro-economic point of view, Rai suggested that a special Interest Subvention Scheme for all categories of MSMEs, having good credit history might be devised to address the present problem of liquidity issue.
He also informed that at present only 50 per cent of MSME customers of the Union Bank opted for the moratorium facility extended for 3-months, while the rest were paying regularly at least for the month of March and April.
Addressing the issue of Credit Rating and fresh loan to the industry, Rai was of the view that process of Loan restructuring had been a continuous process and keeping in mind the mismatch in disclosure statement by the borrower, RBI was not comfortable with doing away with the rating.
However, he strongly felt the need for internal rating for MSMEs as it was a serious problem, as most of the Agencies followed the rules devised for the corporates. A different benchmarking of Rating for MSME loans was the need of the hour, he added.
Real estate and its revival were important, however, there was no way to fix the problem quickly, Rai felt. Huge borrowing had already been done in the real estate sector by the leading companies and a holistic approach was required to address the cash flow plans of the companies who were having more capital. “Bank cannot extend credit if there are insolvency issues”, Rai added.
Speaking on the future of the industry, Rai identified the need to support the Start-ups and MSMEs with new and potential ideas. ‘Good bank does not get good customers and vice-versa, the bank is ready to support them’, he added.
Responding to a question on the future of NPA post COVID, he observed that it was too early to make any confirmative statement.