They admitted that PSBs are less nimble than private banks in adapting rational practices while lending to SMEs
Small businesses in India have been worst hit in terms of loan disbursement by demonetisation and Goods and Services Tax (GST), officials of Public Sector Banks (PSBs) said on Friday at the ASSOCHAM BFSI Summit – 2018 in the city. They admitted that PSBs are less nimble than private banks in adapting rational practices while lending to SMEs. They also said that capital (lack of it) is a major constraint in raising lending to the small businesses.
In one of the sessions, SR Mahapatra, AGM of Dena Bank said that SME borrowers are the most affected after demonetisation and GST. "They are unable to get finance. They have issues of access to bank finance," said Mahapatra. He admitted that terms and conditions (of PSBs) is age old and not in tune with changing dynamics of banking business. "Still banks use old parameters to lend. While new parameters like cash flow of the business and intent to repay the loan are not much in vogue," he said.
Businessmen attending the summit said that if private banks can be simplify and expedite lending, why are PSBs not adapting them. To this Mahapatra replied that the practice is still in its infancy (in PSBs) and lots of training is being done. "We are changing to the new ways of banking and lending but the gestation period is longer in government-owned banks than in private banks," he said.
Rohan Bhargav, senior manager of IDFC Bank Ltd said that legal aspects need to be balanced while becoming more adaptive to new norms. SK Pagariya, AGM of Bank of India said that considering the critical role SMEs play in the economy, especially in new job creation, lending to this sector should increase to produce goods locally instead of importing the goods. "The country has become a market because of imports," he said.
ASSOCHAM is elated with the response generated by the summit and has decided to organize the summit every quarter in other cities of Gujarat. Bhagyesh Soneji, chairperson of ASSOCHAM – Gujarat State Council agreed to bankers' assessment that demonetisation and GST has hit hard the SMEs.
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