Moneycontrol PRO
you are here: HomeNewsBusiness

Government plans to develop a system for financial ratings of MSMEs, says Union Minister Nitin Gadkari

There is potential for growth in sectors like shipping and biofuel industries, and banks should design products for such businesses, Gadkari said.

June 28, 2021 / 04:06 PM IST
Union Minister Nitin Gadkari (File image)

Union Minister Nitin Gadkari (File image)

The government will develop a system of financial ratings for upcoming micro, small and medium enterprises (MSMEs) so that banks can make better credit judgments for such borrowers, Union Minister for MSMEs Nitin Gadkari said on June 28. He sought inputs from bankers for designing the system of ratings.

“I would request you that the MSMEs which have to start their business in the preliminary (stages), it is difficult for you to make a judgment about their integrity and capability. But there are MSMEs who are doing an excellent job. We can make some financial ratings for them. On the basis of that, now we need suggestions from the bankers on the procedure by which we can make these ratings,” Gadkari said. He was speaking at the launch of the Maharashtra chapter of Indian Bank’s business mentoring programme for MSMEs.

Broadly, the system of ratings will depend on the annual turnover, goods and services tax (GST) records, income tax records, exports and the credentials of each company. Profitability and the quality of the balance sheet will also be important factors, Gadkari said.

Gadkari added that the Ministry of MSME is working to develop a portal as a single-point platform for all the services offered by the government for small businesses.

Gadkari further said that industries like shipping and biofuels offer good financing opportunities for banks. The Minister pointed to the government’s decision to allow the production of ethanol from foodgrains and said that this offers good potential for growth in states like Maharashtra, Karnataka, Tamil Nadu and Uttar Pradesh.

The Ministry of Road Transport and Highways expects the launch of flexible-fuel vehicles in India in the coming months and these, too, should offer financing opportunities for banks, Gadkari said. “My suggestion is that with your out-of-the-box approach, bankers can find out which are the technologies and fields where demand is there,” Gadkari said.

Banks’ exposure to micro and small industries stood at Rs 3.72 lakh crore, as on April 23, 2021, 3.8 percent higher than a year ago. Their loans outstanding to medium enterprises was at Rs 1.43 lakh crore, up 44 percent year-on-year. Much of the growth in MSME lending in recent quarters has been driven by the government’s emergency credit line guarantee scheme, which seeks to ease problems of liquidity for MSMEs during the pandemic.

first published: Jun 28, 2021 04:06 pm