The Small Industries Development Bank of India (SIDBI) is seeking to drastically reduce the loan disbursement time to 72 hours from the current average of around three months, focusing on digitizing the entire process.
According to Sivasubramanian Rammann, President and Managing Director of SIDBI, there is a need for proper due diligence and comprehensive risk assessment of MSMEs, especially smaller ones, and it is very time consuming as sufficient data is not available. available in most cases. . However, SIDBI has worked on completely digitalizing the process from loan application to appraisal.
“Conducting risk assessment of MSMEs, especially smaller ones with a loan amount of ₹20-50 lakh, takes time. We were probably taking close to three months to assess a file, but thanks to the digitization initiative we undertook, we were able to bring it down to 10 days. This should further reduce to 72 hours from the time of the request to the disbursement of the money,” Raman said. Activity area on the sidelines of the inauguration of the Assocham MSME Facilitation Center in Kolkata on Friday.
This will lead to growth in loan portfolio volume for SIDBI, in addition to reducing lead time for MSMEs, thus leading to overall growth in advances.
SIDBI’s direct credit portfolio, which includes loans and advances, grew by nearly 17% to ₹11,581 crore as of March 31, 2021, from ₹9,867 crore in the same period last year.
Direct credit accounts for nearly 7% of the total outstanding portfolio in FY21, and the remaining 93% (₹1,44,628 crore) comes from indirect credit which includes refinancing of banks, SFBs (small financial banks) and other financial institutions and assistance to MFIs (Microfinance Institutions) and NBFCs, according to the data available in the SIDBI Annual Report 2020-21.
Digitization of the entire risk assessment and underwriting process is currently being tested and should be ready to roll out by the end of this month, he added.
MSME credit application
Asked about the impact of Covid-19 on the MSME sector and how long it might take for them to recover, Raman said some of the units that have been shut down might not be able to resume operations immediately.
According to a recent survey conducted by SIDBI on the ease of doing business for MSMEs, nearly 67% reported a temporary closure of up to three months in FY21. More than 50% of respondents who participated surveyed saw a more than 25% drop in revenue in FY21.
“A good number of MSMEs that have been closed may not be able to reopen. However, there is a lot of pent-up demand (for credit) in the sector. The Reserve Bank of India and the government have done everything they can (for the recovery of the sector) and we can hope for a fairly quick recovery,” he added.
February 12, 2022