SIDBI provides 100% funding for MSMEs’ green and clean projects
A big step towards green financing has been made with the announcement of 100% funding for green and clean projects by MSMEs by the Small Industries Development Bank of India (SIDBI).
SIDBI is the main financial institution in the nation responsible for developing, promoting, and funding the MSME (Micro, Small, and Medium Business) sector.
“We encourage MSMEs to take advantage of SIDBI’s financial incentives for installing solar energy systems and implementing energy-efficient equipment and operational procedures. Depending on the MSMEs’ credit standing, SIDBI offers 100% loans with interest rates as low as 7%–8% for the installation of rooftop and ground-mounted solar rooftop electricity projects. In accordance with our new loan strategy in collaboration with Tata Power, we lend up to INR 7.5 crore to qualified MSMEs without imposing a processing fee in exchange for 25% margin money as security.
Ashwani Dhingra, Zonal Head, Central Bank of India, said, “This year, we aim 61% growth in MSME credit at our Mumbai and Goa Zone from INR 6,577 crore as of March 2023 to INR 10,618 crore by March 2024. Credit growth to MSMEs is expected to outperform overall credit to industry this year in Mumbai and Goa Zone, which is our largest zone in India. Consequently, the share of MSMEs in the overall credit outstanding in this zone is targeted to grow from 12% as of March 2023 to 15% by March 2024.”
Dhingra added that entrepreneurs can borrow up to 25% of their GST payment from the previous fiscal year via the bank’s CentGST program, and that the bank does not require external credit ratings for MSME loans up to INR 25 crore.
Sherine Mendez, General Manager (Priority Sector Group), IDBI Bank, also spoke at the event and offered information on her bank’s lending programs for women’s self-help organizations and MSME borrowers.
Kotak Mahindra Bank Limited’s Sunil Daga, President of Business Banking Assets, emphasized that private banks dominate MSME lending because they account for 65% of the total amount of outstanding MSME credit in the banking system. Given that it has a 6% market share in this industry, Kotak Mahindra Bank is dedicated to meeting the loan needs of MSMEs.
In his remarks, Gagandeep Singh, Senior Manager, Primary Market Relationship, National Stock Exchange of India Limited (NSE) pointed out to the recent surge in the number of MSMEs raising equity capital from stock exchanges. He informed, “So far in the current financial year, 46 MSMEs have listed on the NSE Emerge Platform and raised INR 1,400 crore equity capital, far higher than INR 1,300 crore raised by 62 MSMEs in the full year 2022-23.”
Singh added that NSE Emerge has assisted 355 MSMEs in raising INR 6,600 crore in equity financing since 2012. Gujarat and Maharashtra are the top two states, with 102 and 101 businesses from each state having already listed on this platform.
MSMEs are the most compliant borrowers when compared to large businesses, hence Vijay Kalantri, Chairman, MVIRDC WTC Mumbai, urged banks encourage and assist MSMEs’ loan needs, particularly during times of business slowdown.
He said that banks shouldn’t lower the credit limit for small businesses by blaming a decline in sales or export orders. Instead, as the economy wakes up in the future, there should be enough credit available to maintain production, increase inventory, and fulfill new orders.
Singh added that NSE Emerge has assisted 355 MSMEs in raising INR 6,600 crore in equity financing since 2012. Gujarat and Maharashtra are the top two states, with 102 and 101 businesses from each state having already listed on this platform.
MSMEs are the most compliant borrowers when compared to large businesses, hence Vijay Kalantri, Chairman, MVIRDC WTC Mumbai, urged banks encourage and assist MSMEs’ loan needs, particularly during times of business slowdown.
He said that banks shouldn’t lower the credit limit for small businesses by blaming a decline in sales or export orders. Instead, as the economy wakes up in the future, there should be enough credit available to maintain production, increase inventory, and fulfill new orders.
“Historically, the recovery rate from banks’ MSME portfolio is higher compared to large corporate portfolio. Despite this, the share of MSMEs in priority sector lending of the banking system has been falling from 12.5% in the past to 8.5% today. RBI data shows MSME credit is growing at 13% as of August this year; but this growth is lower than the 47% growth seen last year. Private banks are more willing to lend to MSMEs than public sector banks in recent years.”
In order to achieve a $5 trillion economy and $1 trillion in exports, Kalantri underlined the necessity to close the credit gap in the MSME sector. An RBI Committee estimates that the MSME sector has unmet credit needs worth more than INR 25 lakh crore. Also, financial institutions ought to offer sustainable financing to support MSMEs’ adoption of green technologies.
In order to regularly offer advice to MSMEs, Kalantri advised that SIDBI and commercial banks establish MSME advisory committees at the headquarters level as well as in other regions. Moreover, the UK Sinha Committee, the PJ Nayak Committee, and other expert groups on MSME credit may execute all of their recommendations.
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