Budget 2018: SMEs expect availability of finance

Reports expect the government to focus more on increasing the availability of finance for SMEs, and also improve the infrastructure required to lower their cost of doing business.

In fiscal year 2017, loans worth Rs 1.75 trillion were disbursed under Pradhan Mantri MUDRA Yojana (PMMY), against a target of Rs 1.80 trillion, which works out to 97 per cent of the target. The PMMY, launched in Union Budget 2016, which aims to provide collateral-free credit of up to Rs 1 million to small business proprietors and partnership firms.

Overall SME lending market grew at 13 per cent compound annual growth rate in the five fiscals through 2017, to an estimated Rs 14 lakh crore, with non-banking finance companies (NBFCs) recording a four-fold increase in their credit book. The cumulative market share of non-banks in micro, small and medium enterprise (MSME) financing rose to 18 per cent in fiscal 2017, from 8 per cent five years ago, reported Money Control. NBFCs are likely to outperform banks with sharper focus on small-ticket loans, adoption of technology and data analytics, and focus on small towns and cities.

However, due to demand-side pressures and liquidity issues after the implementation of demonetisation in November 2016 asset quality in the MSME segment worsened. In fiscal 2017, gross non-performing assets (GNPAs) increased by 70-100 basis points across lenders, led by public sector banks. N

Reports expect the government to focus more on increasing the availability of finance for SMEs, and also improve the infrastructure required to lower their cost of doing business.

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