The KVIC has received several complaints about banks not agreeing to lend even to businesses with confirmed government orders. KVIC chairman Vinai Kumar Saxena told ET that he will “soon take the issue up with the finance minister,” without elaborating.
There have been multiple instances of banks refusing to support micro, small and medium enterprises (MSMEs) recently, a government official aware of the matter said. “There is a confirmed government-to-government order, (where) supply is ensured, but banks can’t support short-term working capital?” The issue has been flagged to most lenders, the official added.
“This is the biggest challenge that small businesses in India are facing today,” said KR Sekar, partner at consulting firm Deloitte. “The only way to solve this problem is for banks to come up with an entirely different criteria for evaluating small businesses and disbursing loans to them,” he said.
Besides, the government should also look to establish development finance institutions for small businesses, he added. A committee headed by UK Sinha, the former chairman of markets watchdog Securities and Exchange Board of India, in a report presented last year also recommended that lending norms for small businesses should be entirely different from those for big firms, Sekar said.