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We are committed to work jointly with various partners to support MSMEs and Start Ups. We have entered into these MOUs with a view to enhance our foot print in delivery of products and services in MSME ecosystem. This is an endeavour to simplify operational processes and to improve access to finance for MSMEs from early to growth stage. We will continue to launch various initiatives in this direction that will support ecommerce and their derivative segment.”

P S JayakumarMD & CEO, Bank of BarodaAt Micro Entrepreneurs Conclave, 2018

Admirable MSME approach

Bank of Baroda Follows SBI, Writes Off Rs21,474 Crore in Bad Loans;  Recovers only Rs1,057 Crore in Past 8 Years

Bank of Baroda reaches out to MSMEs in multiple ways. The bank works on all the government schemes aimed at promoting MSME growth in true spirit and stays ahead of others in terms of taking them to the ground, thanks to the deployment of trained talents and sophisticated technology platform for this purpose.

Bank of Baroda (BOB) is one of India’s largest commercial banks. The merger of two commercial banks Dena Bank and Vijaya Bank with it would make BOB bigger with considerable penetration in its non-traditional geographies of Karnataka and other southern markets. At the end of the financial year 2018-19, the bank’s combined business stood at over Rs 11 trillion showing a growth of nearly nine per cent over the same period of the previous year. Close to 20 per cent of the bank’s business comes from foreign operations. MSME Business is growing at a healthy rate. Its asset in the MSME segment now stands at around Rs 60,000 crore before merger.The Central government has launched various schemes for MSMEs in the recent times. Every region of the bank organises MSME support and outreach Program time to time to create awareness about recent initiatives undertaken by the government for financing the MSME sector. In such program, the bank gives on-the-spot sanction letters to beneficiaries of various government programs.

BOB stands at the forefront of delivering time to time what the government calls for, be it loan in 59 minutes, Stand-Up India, Mudra Loan or any service under the government scheme. BOB has many first to its credit. In fact, in response to the government efforts under Mudra scheme on employment generation, BOB posted a credit disbursement of Rs 5,093 crore, achieving 121 per cent of the set targets last year. That has made the bank stand first among public sector banks for lending under this scheme. It also stood first in Stand-up India program in disposal of applications on Udyamimitra portal, says Mr K.P Singh,Head–MSME Relationships and Government Schemes at Bank of Baroda.To ensure the availability of timely credit to the beneficiaries under the Government schemes, the bank is setting up a centralized cell in each district for processing of loan applications.

In the Gram Swaraj Abhiyan, BOB could exceed the allocated targets in Uttar Pradesh and Rajasthan where it is the convener of SLBC. BOB also has structured-products for the MSMEs. It has realigned all the processes to enable MSME to access credit without hassle. Over the years, it has funded roughly a million units,many of them have flourished in their business and sill stay loyal to it.

BOB was the first to onboard all the three TReDS platforms to provide MSMEs an access to working capital. The bank has already taken many other initiatives for boosting the MSMEs, besides working in tune with the government sponsored schemes and for encourage digital transactions.

The lunch of Baroda e-business pack for financing MSME units is another step in line with the government’s call for moving into digital platforms.It is one of the banks in the country to have a dedicated MSME serving window, which it calls the MSME Loan Factory. SME Loan Factory, set up with the aim of faster credit dispensation,operates on assembly line principle. It has separate Hub for centralized processing of SME proposals. Now it is centralizing all loan processing, approval, disbursal and monitoring. This has already been implemented in Delhi and Mumbai centres. That enables MSME Loan Factory to give small business direct access to all MSME products, undercut-ting the turnaround time for processing, due diligence and disbursement.At present,thereare42MSMELoan Factories, which give end-to-end services.

Another major strength of BOB is its highly trained talent within. The bank has trained specialized officers, who are capable of managing MSME customers as they understand the nuances of MSME business and their inherent shortcomings. They come up with quick solutions for MSMEs looking beyond the straight lines of margins and cash flow. For clusters, the bank has developed tailor-made products understanding the basic nature of their business.

At present BOB has eight area specific schemes for financing SME clusters and 27 specific products for MSMEs. As most MSMEs which are doing well, are reluctant of showing their real turnover and profit margin, their audited report will speak much more than their actual business. Though this trend is changing fast and MSMEs are slowly coming to terms with the change of time, there are some small enterprises, which still resort to the old habits. In the context, BOB has adopted a different strategy so that all deserving MSMEs can access its services. The implementation of GST has changed this trend drastically, though initially many small enterprises had difficulties to migrate into this platform and meeting the compliance requirements. Many lenders have supported such small units in permissible ways. But those who have become GST compliant could gain banks’ supports easily. BOB thus launched a special product for financing against GST receivables, which could mitigate working capital pains of MSMEs arising from the GST implementation. This has compelled MSMEs to be transparent in terms of invoicing. Lenders can gauge on this to ascertain the actual business volume and cash flow position of an enterprise. At the same time, BOB also follows score based lending i.e. CIBIL MSME Ranking (CMR) with very competitive ROI, which has led to an improvement in credit profile of new credit origination.

Further new verticals are being created within MSME department to focus on specialized lending such as Commercial Vehicle,Construction equipment finance and Value chain finance which focus on 2 and below derivative of any value chain.

Many MSMEs still face the challenge of getting timely finance.That is mainly because of their own drawbacks. If their books are not maintained well, actual size of their business does not reflect in their books, being averse to the culture of credit rating and unless they understand the need of being professional and systematic, the small businesses will continue to face the challenges of funding their projects. They will fail to have a bargaining power. Commercial banks have enough strengths to support them and would be very enthusiastic to do that, points out Mr K P Singh. But they must be transparent and update their system and operational culture, says Mr Singh.Its fully digitized supply chain financing product has provided a new vehicle for sourcing of MSME customers – vendors and dealers of large business establishments, which act as anchor corporates. Its offer of cash management solution helps in augmenting the efficiency of working capital through digitization of cash management. Last year it entered into arrangements with e-commerce players and started providing credit to the sellers on the digital platform. Its partnerships with financial technology players (FinTech) players has led to value additions in terms of improved due diligence, better marketing opportunities and faster service delivery. The bank has MoUs with multiple players in the sectors of transportation, travel, health care, food, dairy, etc to provide credit to units engaged in these sectors.

Last year, BOB held Micro Entrepreneurs Conclave emphasizing the institution’s commitment to promote micro and small business entrepreneurs. In the Conclave, the bank entered into a Memorandum of Understanding (MoU) with 10 companies ranging from segments as diverse as e-commerce, logistics, service providers and traditional small business. A year ago BOB entered into a Memorandum of Understanding (MoU) with Small Industries Development Bank of India (SIDBI) to work together for strengthening credit delivery system and facilitating smooth flow of credit to the MSMEs, including Startups in a hassle-free manner.The bank hence became preferred partner of SIDBI to support the MSMEs through various initiatives.

At present, BOB has eight area specific schemes for financing SME clusters and 27 specific products for MSMEs. As most MSMEs, which are doing well,are reluctant of showing their real turn over and profit margin, their audited report will speak much more than their actual business.

Our MSME Survey Reveals

The over-attention rendered on the service sector, especially the new economy sector and massive service sector growth led to the overall growth of the economy, but without reflecting a corresponding growth in job creation.Some entrepreneurs were not so convinced by GDP growth as they hadn’t seen betterment in their fortune.We found, this mainly happened because of growth in industries, which were not manufacturing-intensive but technology service bound. Small enterprises with focus on manufacturing of various items couldn’t find much legroom for growth in the transforming economy, because of the cheaper imports available in the market as replacement for their products. Those who have extra-ordinary capability to manufacture products, which are import-substitutes,lack marketing skills. The government schemes like Make in India,Skill Indian, Standup India were appreciable. But a small company with manufacturing skills couldn’t find much from these schemes. Many of the small entrepreneurs do not have good communication skills and marketing prowess. They are out of the new environment, mainly because they are not savvy with the technology driven functional changes. The proliferation of technology and emergence of technology platform for better efficiency and delivery of services have brought both boon and bane for many small enterprises in the context of the fact that a large portion of millions of MSMEs are yet to be tech-savvy. Many micro enterprises are yet to be identified as business enterprises as they are still out of the purview of MSME nodal authorities.They operate without any enterprise structure, because of their poor tax pay-ability, credit accessibility or non-eligibility for any government incentive. A self employment venture is micro enterprise. Most of such micro enterprises are left out of the mainstream MSME having inability to access any benefit from government or institutional schemes.


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