MSME Linkage

MSME Linkage

MSME Financing & Strengthening MSME Linkages:

National Conference & Round Table Meetings
19th & 20th September, 2014 Kolkata

The Indian Chamber of Commerce organized National Conference & Round Table Meetings on MSME Financing & Strengthening MSME Linkages on 19th and 20th September, 2014 at Swabhumi, Rangmanch, Kolkata .Objective of the Conference was to bring all stakeholders in a same platform & create linkages for fostering growth & development in this sector.

On 19th September, 2014 addressing the Opening Session of the conference, the Guest of Honour Mr R P Singh, Parliamentary Secretary, Department of Industries & Commerce, Government of Assam, spoke on the vital roles of the MSME sector in developing the economy in terms of GDP growth, employment generation and surging up the export. He primarily focused on the potential of Assam to increase its commercial viability across the world and to increase its global competitiveness across sectors.

Special Guest Dr P S Ahuja, Director General, CSIR during his deliberation stressed upon the necessity of adoption of modern technological tools and practices to enhance the self reliance of the MSME units and to be able to be at par with other technologically advanced countries in terms of competitiveness. Mr. Ahuja pointed out that CSIR has been playing the leading role for years to provide the legitimate technological solution to various MSME units. CSIR has a conglomeration of 38 laboratories across India for 648 products. Out of these, 7 laboratories are present in Eastern and North Eastern region. West Bengal alone has got 3 labs in its kitty.

Plenary Session I: Examining Constraints & Positive Developments in MSME Financing In India


  • Mr Ganesh Sarkar, Chief Manager, Canara Bank
  • Mr Partha Sen, AGM, State Bank of India
  • Mr Souvik Sengupta, Business Head-SME, Reliance Capital
  • Mr Ajay Thakur, Head, BSE SME

Plenary Session II: Enhancing MSME Competitiveness through Technology Solutions & MSME Vendor Development


  • Mr Anupam Joggani, Associate Vice President – Excellence Assurance, Tally Solutions Private Limited
  • Mr Mahendran M, Manager (QA & VR) Garden Reach Ship Builders & Engineers Ltd.
  • Ms Monika Maloo, Sr. Manager, Purchase, Birla Corporation
  • Ms Swastika Basu, Chief Procurement (MRO & Services), Tata Steel
  • Mr Souvik Sengupta, Business Head-SME, Reliance Capital, Reliance Capital
  • Mr. Tapan Roy, Chief Projects, Hindustan Aeronautics Ltd.
  • Mr A K Sasmal, Director-Operations, Senrysa Technologies (P) Ltd.

Round Table Meetings: ICC organized Two Day Round Table Meetings with MSMEs, Large Procuring Organizations & Banks in which the following LPOs and Banks had participated:

  1. GRSE
  2. CESC
  3. ONGC
  4. Birla Corporation
  5. HAL
  6. Science City
  7. Oil India
  8. Paharpur Cooling Towers
  9. South Eastern Railway
  10. Gun & Shell Factory
  11. Shipping Corporation
  12. Tata Steel
  13. Tally Solutions
  14. Coal India
  15. BSF
  16. Punjab National Bank
  17. Reliance Capital
  18. Canara Bank

The Round Table Meetings and the Conference was attended by 190 delegates.

Exclusive Session with Mr Kalraj Mishra, Hon’ble Union MSME Minister, GOI on “Vision for Globally Competitive MSMEs’

Indian Chamber of Commerce organized an Exclusive Session with Mr Kalraj Mishra, Hon’ble Union MSME Minister, GOI which was attended by the following:

  1. Mr B Longkumer, OSD (Industries & Commerce), Government of Nagaland
  2. Mr I Bendangliba, Additional Director of Industries & Commerce, Government of Nagaland
  3. Mr K V Srinivasan, CEO, Reliance Commercial Finance
  4. Mr Souvik Sengupta, Business Head- SME, Reliance Capital
  5. Mr J K Mahanta, Chief General Manager – East & NE, NSIC
  6. Mr N N Debnath, Director, MSME-DI, Kolkata
  7. Mr K D Bhattacharya, Deputy Director(G & C), MSME-DI, Kolkata
  8. Mr Santanu Mukherjee, Managing Director, State Bank of Hyderabad
  9. Mr Kumar P Saha, Managing Director, Senrysa Technologies (P) Ltd.
  10. Mr A K Sasmal, CEO, Senrysa Technologies (P) Ltd.
  11. Mr K G Alai, Business Head – I, Central, East, North-East & North, SIDBI
  12. Mr D R Dogra, Managing Director, Credit Analysis & Research Ltd
  13. Mr Anupam Joggani, Associate Vice President – Excellence Assurance, Tally Solutions Private Limited
  14. Mr A V Santosh, AGM-SME, Canara Bank
  15. Mr Shiv Siddhanth Kaul, Sr. Vice President, Indian Chamber of Commerce
  16. Dr Rajeev Singh, DG, ICC
Key Takeaways and the points discussed at the Exclusive Session:
  • The Eastern and North Eastern Region of India has got enormous potential to facilitate growth in MSME sector in a diverse range of products. Although 25% of India’s MSME units are present in the East and North eastern region of the country, yet by looking at the profile of MSME in North east it can be found that the contribution of those units in the aggregate GDP stands out to be only 13%. And most importantly most of these units are basically micro enterprises. Coming to the statistics of clusters, it can be found that there are presently 4259 MSME clusters, 1086 industrial cluster and 2682 handicraft clusters in the Eastern and North Eastern region of India. Amongst all states in the Eastern region, Uttar Pradesh alone stands out to be bigger than entire North East region. Given the large scale attempts to promote industrial clusters in the MSME sector, it needs to be pointed out that cluster promotion in India must move beyond ‘sectoral’ bind. A regional development strategy must be incorporated in cluster development policy.
  • Although several programmes have been undertaken by the Government to promote MSME units across the country, including the Credit Guarantee Scheme, yet new MSME application registration has remained very low in the Eastern and North Eastern region compared to the Southern and Western part of the country. Also the rating coverage has not spread across this region properly. If the micro and small enterprises follow the MSME ratings then it will provide them with better access to fund as ratings are widely recognized by banks and other financial institutions. It enhances acceptability with banks, lenders and financial institutions and helps to obtain credit at a cheaper rate and at a faster pace. It also helps to meet the regulatory requirements. It reduces collateral requirement and simplifies lending terms. Acting as a benchmark, the rating helps the MSMEs to identify its position vis-à-vis its competitors in terms of financial and non financial parameters and provides scope for further improvement.
  • Regional imbalance, inadequate infrastructure, low income statistics (except West Bengal), dependence on agriculture are counted to be the major impediments for the growth of MSME units in the region. With globalization and changes in communication technologies, new challenges have arisen for MSME units in the Eastern region of the country. The continuous changes regarding the concept and techniques of marketing and consumer preferences have become important factors for the MSME sector as a whole.
  • Of all the problems faced by the MSMEs, non-availability of timely and adequate credit at reasonable interest rate is one of the major key impediments for growth of MSMEs. The first generation entrepreneurs often don’t get access to credit at reasonable interest rate .The high risk perception of the banks in lending to MSMEs and consequent insistence on provision of collaterals often make it difficult for the micro and small entrepreneurs to set up new business or expand the existing one.
  • Tax compliance among the Micro and small enterprises has been very poor in India. In most of the cases high tax rates and complex filing procedures are the most crucial factors causing non-compliance of SMEs. Other factors which are also found responsible for presence of lack of accountability issues are multiple taxation and lack of proper enlightenment among the SMEs.
  • It is recommended that government should levy lower percentages of tax on the SMEs (small and micro enterprises) to grant enough funds for business expansion and better survival of MSMEs in a competitive market. Increase in tax exemptions and tax holidays are expected to incentivize the entrepreneurs for voluntary compliance .Such initiative will also eventually attract investors who are potential viable tax payers in future.
  • Awareness needs to be increased among MSME entrepreneurs, business associations and other stakeholders regarding adoption of modern technology in packaging to increase the product competiveness not only in domestic market, but also in international market. It is important for the entrepreneurs to increase links with multiple stakeholders to benefit from networks both nationally and globally and strive for a larger market. An enabling environment is called for, which will be suitable for all kind of MSMEs to participate in global value chain and markets.
  • Transparency becomes another big problem to establish direct linkage between banks the MSME entrepreneurs. As most of the small and micro enterprise owners don’t want to expose their actual earning and profit amount, in spite of having the willingness ,the banks often can’t provide financial assistance to them due to lack of proper documentation. It’s a high time for the MSME entrepreneurs to understand the fact that if they present the details of their turnover and have a transparent dealing with the banks, they will actually benefit in several tax related issues and regulatory measures.
  • The definition of Priority sector lending for MSMEs now days suffer from lack of clarity. The definition of MSMEs, based on original investment in plant and machinery needs to be revised. As the priority sector lending in case of MSME mainly refers to provision of resources on a substantially lower rate of interest for being deployed in the MSME sector, it is targeted to benefit only the needy borrowers who want to start up their business. However, often some entrepreneurs claim for the benefit under PSL, though turnover wise they may not satisfy the qualifying criteria. To ensure avoidance of such incidences there is a requirement to implement more stringent norms for one to come under PSL category. One should be eligible to reap the advantages of PSL only after submission of proper documentary evidence. The confusion is mostly created during the transition of a small scale firm into a medium one. An appropriate regulatory framework should also be created to assure help to the genuine applicant.
  • Taking into account the profitability concern of banks, it is suggested that the annual fees to the MSME units should be imposed on the outstanding amount, instead of sanctioned amount. Presently a composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSME entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. As presently banks’ profitability is under strain, the sanctionable amount should be reduced to Rs 50 lakhs from Rs.1 crore.
  • There should be a nodal bank to avoid the high switching cost for the entrepreneurs. Moreover, as switching a main-bank has no effect on lending interest rates; it would be helpful for the entrepreneurs to correspond to a particular bank. The trouble of asymmetric information will also be solved to some extent as it will strengthen the relationship banking as an opportunity to promote repeated interaction between banks and MSMEs and greater absorption of MSMEs ’soft’ information by commercial bank.
  • Delayed payments have been a major roadblock for the growth of MSMEs in the country, which requires immediate attention. Payment delays by corporations raise the transaction cost of small and medium enterprises (SMEs), which eventually creates problems for these units. There should be provision of laws to penalize the big companies by charging them a three time higher rate of interest. To mitigate the problem of arising delayed payments it is suggested that large corporations should report to the Reserve Bank of India (RBI) with details of payments not made to MSMEs within the stipulated 45 days. Companies’ names found faulty in setting dues to MSMEs should be put up on the RBI website.
  • Technology and IT services have got to play a major role to accelerate the growth of SMEs. Although most of the investments are presently done in traditional technology, but to follow the trend, investment should increase in R&D, particularly in areas of emerging technologies including mobility, data analytics and cloud computing to improve the core business.
  • Although the ‘Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises’ is supposed to provide a coverage of collateral free loans to the first generation entrepreneurs ,however proper information is not being circulated among all eligible entrepreneurs. The information thus needs to be propagated to branch level so that it gets disseminated among all relevant stakeholders and they can avail the benefit of this scheme.
  • Creation of social entrepreneurs is desired to promote e-commerce among rural consumers. There lies a potential market for e-commerce in rural areas which can be explored by undertaking certain policy initiatives and using modern technological tools.
  • Amount of investment in service sector has been very low in micro enterprises. The amount of seed capital should be lower to encourage the social entrepreneurs. It will not only enable the micro enterprises to gain a growth momentum, but also lead to generation of employment among rural populace.
  • Coming to the major bottlenecks for growth of MSMEs in the North Eastern region, the MSME units face constraints in the form of land acquisition, availability of power, transport, logistics, credit disbursal, skilled labour, adequate marketing initiatives and issues in taxation. Unless these structural issues are addressed by the government, North East may not be able to sustain the robust growth in coming years. Most importantly the common structural issues need to be addressed to maintain sustainability in NER. It is necessary to mobilize the SMEs in North East to channelize their resources for economic development of the region and government has got an important role to play in execution of this task.
  • Lack of entrepreneurial zeal among the people and absence of innovative initiatives are counted as the major reasons for this region to lag behind. It’s required to spread awareness among youth about entrepreneurship to utilize the endowment of huge untapped natural resources. They need to be encouraged to build up products that can be offered outside the NER.
  • Inadequate access to various financial schemes and relationship with bankers are two major barriers for growth of SMEs in NER. Due to lack of adequate assistance from banks and financial institutions, the working capital needs of firm is mainly met from personal savings, sundry creditors and other short term borrowings. The prolonged disconnection of this region with rest of the country in several aspects is the reason for reluctance of banks and private investors and venture capitalists to venture here.
  • Access to finance, technology upgrade, high-end skill generation and creation of marketing linkages are the four verticals through which new opportunities will drive the growth story towards increased purchasing power and consumerism in this part of the country.
  • Management education needs to be imparted among the young entrepreneurs in NER which can be further pushed across. Social media can be heavily utilized to spread knowledge about marketing activities among the SMEs. SMEs are often confused about their target markets. Their sales get adversely affected by the unorganized players selling their products cheap on one hand and importing low-cost raw materials on the other. Thus investment in modernization of inputs is required.
  • ICT based services should get introduced in different parts of the region to improvise use of technologies across different segments of SMEs. To cope with the challenges of poor internet coverage, new internet service providers should be encouraged to set up their business units in NER.
  • Lack of training and lack of extension of skill development programs to make the most of modern technologies and other production tools have posed as a serious concern in NER. The owners of MSMEs are not aware of application of innovative methods to increase the productivity and efficiency. The problem of unawareness towards technological advancement can be removed after running effective training and skill development programs. The reach of Government aided skill development programs has not been satisfactory. So there lays a huge scope to explore the untapped potential in NER by endorsing the expertise of manpower in this region. The presently available MSME skill development schemes should be modified according to economic feasibility in this region to benefit the owners of MSME units and the people associated with it.

Suggestions from Shri Kalraj Mishra during the Exclusive Session

According to him a proper correlation needs to be formed among banks, entrepreneurs and financial institutions to find out a comprehensive solution to all problems together. For easy tackling of issues of creditability government is putting effort to implement the single window system. He is hopeful that with full fledged realization of e-governance, more transparency is expected to be on anvil. He also mentioned that PPP mode should be encouraged in MSME sector to improve the marketability of MSME products. Private players should come forward not only to assist the micro entrepreneurs to increase the profitability but also to infuse self confidence among them. He also feels that the micro credit procedure needs to be simplified to tap the potential in North East region. Issues related to lack of credit information from tiny and small scale industries, large risk premium and separate risk assessment tools are not making the MSME loans cost-effective to banks. So proper initiative need to be undertaken to facilitate easy financing to MSME sectors and to put in place different models of financing.

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