SMEs should take a cue from e-commerce cos and tap equity more, says SBI Chief

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26 Aug, 2025 12:21

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Equity is a neglected area in the Indian small and medium sector enterprises (SME) and must be considered when tapping investors, said State Bank of India Chairman Arundhati Bhattacharya.

Speaking at a summit on Indian SME manufacturing, Bhattacharya said, "Equity is a very much neglected area. There are people who can give you equity but one must know how to convince them (equity investors) that you are the right person with whom the returns will be very large."

According to her, one of the major problems in India is lack of equity. “We have many entrepreneurs but they start off with debt from family and friends and then from the bank. With more debt, the requirement of margin goes up and hence strain on financial statements.”

Urging SMEs to present themselves better, she said that equity-raising equal to even one-thousandth portion of the Flipkarts and Amazons, can do wonders to businesses.

"A good idea with good cash flow potential will see investors willing to put in money. What convinces them (investors) is the passion you have for making a successful enterprise. Passion and a rational mind working through the pros and cons of the business are critical ingredients," she said.

Bhattacharya pointed out that amid threats from imports from China, the SME manufacturers must improve their quality, packaging and service of products to become more competitive and also suggested that government and PSUs must come on the TReds (Trade Receivables Discounting System) platform to get the lowest prices for bill discounting.

Stressing that GST and other cost compliances are here to stay, the SBI chief said SMEs must get on the job, invest more on innovation and R&D (Research and Development) and be transparent to the bankers.

Given that SMEs are seeing high non-performing assets in the banking sector, Bhattacharya asked the SMEs to “treat the banker like a family physician”.

"Just like you do not keep your sickness away from your family doctor, in a similar way you need the moment you start experiencing difficulties, you should be with your banker working to find a solution to come out of it. You do not go when you are already in the last stage," she said.

According to her, bankers as well as businesses are skeptical about lending and borrowing as businesses go to their accountants to plaster their temporary difficulties, which sometimes get resolved but not always and the money turns into an NPA.

“Ultimately, the money we lend is your money and not ours. As a banker if you help me believe you that you are doing the right thing, I can help you but not at the last stage. You must come to me at the earliest sign of difficulty and if required cut losses with a one-time settlement…While coming for renewals, ensure you are under-promising and over-delivering,” she added.