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India needs a separate financial architecture for non-corporate small businesses in the country, said S Gurumurthy, noted economist and financial advisor.
It should be non-Basel architecture and could take the shape of 20-30 small business finance companies or institutions, Gurumurthy suggested at a national round table conference organised by the Action Committee for Formal Finance for Non-Corporate Small Business here earlier this week. He said banks are averse to funding the non-formal sector — which is largely unregistered — because of the high human resource costs of lending, and also due to Basel norms, which make it difficult to finance even registered MSMEs, leave alone unregistered small businesses.
He said that non-corporate small businesses were the economic backbone of the country, contributing a value addition of ₹6.28 lakh crore a year, but this sector was the most financially under-served. Finance Minister Arun Jaitley had, in his maiden Budget, announced that he would appoint a committee to give concrete suggestions on financial architecture for the SME sector.
Praveen Khandelwal, National Coordinator of the Action Committee, said as many as 30 ‘Jan Adalats’ will be held over next two months in various States.
Similar round-table conferences will be held in top cities and a White Paper would be prepared, based on the inputs received, he said.
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