Indian Bank open to MSME lending under special mention accounts, says CEO
Indian Bank is open to lend to the micro, small, and medium enterprises (MSME) in the Special Mention Account (SMA) category because of the government guarantee announced by the finance minister in the Union Budget 2024, Managing Director and Chief Executive Officer Shanti Lal Jain said in an exclusive interview with Moneycontrol.
"We are open to everything. We are open because we are a bank and we know the customer is with us, history is with us. We are lending under SMA 1 or SMA 2 to our own customers," Jain said, pointing out that the government has said that the guarantee will be available for these two categories.
Finance Minister Nirmala Sitharaman in her Union Budget 2024 announced a new mechanism for facilitating continuation of bank credit to MSMEs during their stress period. While being in the ‘special mention account’ (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and to avoid sliding into the NPA woes.
Credit availability will be supported through a guarantee from a government-promoted fund, Sitharaman said in budget speech.
She added that state-owned lenders will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. "They will also take a lead in developing or getting developed a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy."
Sitharaman also said this is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria. That will also cover MSMEs without a formal accounting system.
On the MSME collection efficiency front during the April-June quarter, Jain said that the drop in collection efficiency is due to various factors such as heat wave across the country, elections, and seasonality.
"In the April to June quarter, there are heat waves scorching the country, then general elections and, of course, there were some seasonality at play in the first quarter," Jain said.
Credit - Money Control