Ravi Uppal says, “Banks and rating agencies should have different yardsticks for MSMEs”

In India, the banks and rating agencies need to change the criterion for Micro, Small and Medium Enterprises (MSMEs) to support the growth of this sector. For the promotion of such small units, they need to change their perspective.

It is baseless to set the same standards for an Adani Group and an MSME, as their market values are different and need a different benchmark.

Ravi Uppal, an eminent business leader, who held a position at Jindal Steel & Power, L&T, ABB and Volvo India, in an interview, said, “One of the things that I keep telling is about banks and rating agencies approach towards MSMEs. They are using the same yardsticks to measure the performance of an MSME unit as they do for a $10 billion company whether it is Reliance Industries or an MSME, banks and rating agencies use the same yardstick. This is not the right approach.”

Banks and rating agencies need to know the resource limitations with which the MSMEs operate. They do not realise that they use the same measure that is applied to big companies. Hence out of the 6.5 million MSMEs in the country, only a few can strive and achieve better ratings which helps them in accessing the capital at lower costs.

Uppal said that whether it is a micro, small or medium company, they are gradually going to come up. None of them will reach a 25 per cent Return on Capital (RoC). Hence, the banks and rating agencies should encourage them and inspire them to do better. Also, measure their performance based on the limitations with which they operate as they deserve a different yardstick to assess them.

In Uppal’s view, if the root problem of the MSMEs of keeping different parameter for them was addressed then another thing such as cheap credit and securing capital will also fall into place and solve almost all of their problems.

He also suggests the banks to keep one key barometer while extending credits to the MSMEs. It is that they must ensure that the MSME units have a basic digital education. Or else the banks would have signed their death warrant on the day they are born. “Digital empowerment is essential in the MSME sector for their future growth and survival,” he added

However, if these banks and rating agencies continue to set inappropriate criterion for the MSMEs with restrained outdated technologies, India will never be able to reach the goal of an economy of $5 trillion or in better words to achieve an ‘Atmanirbhar Bharat.’

Image Credits- SteelGuru.in

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