Tamil Nadu   

SMEs asked to keep bankers in the loop while planning expansion

Chennai: Small and Medium Enterprises (SMEs) need to take bankers into confidence while planning expansion, said A.K. Bansal, executive director, Indian Overseas Bank.

At a CII seminar on ‘Finance availability of SMEs,' Mr. Bansal said highly successful entrepreneurs in the sector had a tendency to divert working capital at the time of rapid expansion. Without obtaining necessary funding from banks or financial institutions, many flourishing SMEs go for expansion with working capital only to melt down.

S. Sivagnanam, Director, MSME Development Institute, said the SME sector was the engine of growth without fuel. Only five per cent was under institutional finance and there were many issues confronting the sector, including lending institutions. There were no statistics to show how many entrepreneurs were not granted loans despite SMEs being a priority sector.

Banks should not look at meeting the target by financing a few companies but should lend to many for ensuring overall growth. The bankers looked at SMEs as future defaulters and entrepreneurs were also to be blamed to an extent for creating this mindset among bankers.

Inadequate funding also hampered growth, he said, adding that many eligible entrepreneurs were not even aware of how to present their case to bankers. The SMEs could come together in groups for working capital needs, he suggested.

Anand Sundaresan, chairman, CII Chennai Zone, said the SME sector provided four jobs for every thousand rupees invested and accounted for nearly half of the country's exports.

The sector was less capital intensive and supported by the government by way of subsidies, training and purchases. While the entrepreneurs possess the knowledge of production and marketing, financial aspects eluded them. Financial liquidity is extremely important for SMEs, he said.

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