Q1 Sir, how do you feel the SMEs have fared in the last year with reference to the economic recession?
They have faced severe challenges as the growth has slowed down. Even now they face challenges. The growth of the stock market indices cannot be used for measuring the challenges faced by SMEs. Most of the SMEs have down sized their operations; however, some SMEs who had committed large Capital Budgets are in losses. One can say that they are not yet out of the woods.
Q2. In light of the commendable growth rate of 6.1% at the end of the first quarter of the current financial year and other industry indicators also showing an upswing, what steps can the government or allied agencies take to speed up the recovery of the SME sector?
The Govt can hardly help as the large corporate entities too are in a wait and watch mode. 6.1% growth rate is fine, maybe fueled by Govt spending and infrastructure spending; however, at the ground level the confidence is not yet back. If at all the Govt wants to help, it will be by reducing the interest rates. For this it will have to curb its deficits, and restore to selling of equity in PSUs to raise funds.
Q3. What are the various funding options available to SMEs, particularly owner driven and entrepreneurial ventures, for the businesses?
Most of them rely on borrowings from Commercial Banks, whether Overdraft or Term Loans. Very few owner-driven organizations are keen for induction of private equity or mergers.
Q4. (a) Do you feel that the focus of Banks has completely shifted away from SMEs to Large Businesses since last year due to their fear of Non Performing Assets (NPAs)?
Banks are cautious, however they do lend. The problem is that due to slow-down the drawing power of many SMEs has reduced as they have receivables over 90/180 days.
(b) Do you feel a credit rating for SMEs will help them secure loans from banks. If so who should, according to you, take the onus of setting up a credit rating agency for SMEs in a way that SMEs are not exploited.
Banks have their own Credit Appraisal cells. Credit rating might not work, if they follow a rigid and structured approach.
Q5. What role according to you can international Private Equity (PE) Firms play in addressing the funding issues currently being faced by SMEs today? How can the Indian Government promote these PE firms?
