The newly appointed Chairman and Managing Director of Small Industries Development Bank of India (SIDBI), Dr Kshatrapati Shivaji, told Entrepreneur that the MSME sector is gearing up to be more proactive and responsive to transitioning the nation from “Made in India” to “Make in India.”
As you have recently joined the organisation, what are youe plans to address the credit and non-credit gaps in the MSME ecosystem?
I took over the reins of SIDBI from the first week of March 2015. However, I would like to mention that being a Director on the Board, I have had associations with SIDBI in the past. SIDBI always endeavours for holistic development of MSMEs to enable them to face global competition. Over the years, SIDBI has reoriented its business strategy towards filling up the financial and non-financial gaps in the MSME ecosystem. Going forward, SIDBI will continue to play a strong enabling role for Indian MSMEs and act as a strategic laboratory to pilot products/services that can be scaled up by banking fraternity.
How is SIDBI planning to help MSMEs in the current financial year?
SIDBI, along with National Stock Exchange (NSE), has been operating an electronic platform for discounting of trade receivables of MSMEs. The e-platform is named as NTREES (NSE Trade Receivables Engine for E-discounting in association with SIDBI). Although the platform was designed to serve as multi-financier model, SIDBI has been the single financier so far.
Moreover, in its monetary policy statement in September 2013, RBI had desired to set up a platform for the auction of trade receivables on the lines of Nacional Financier a (NAFIN), the Mexican Development Bank model. In response to the call for applications from RBI for setting up Trade Receivable Discounting System (TReDS) platform, an institutional mechanism for facilitating the financing of trade receivables of MSMEs through multiple financiers, SIDBI, along with NSE Strategic Investment Corporation Limited, a Subsidiary of NSE, has filed an application with RBI to set up and operate the platform. We expect to be successful in obtaining the license to operate TReDS platform.
What else are you planning?
To reach out to new business models like franchising, a study was completed on “Credit Gaps, Potential and Financing of Franchisees in India.” The study was an effort to understand the challenges of the franchising industry in India and examine the best practices in other parts of the world and present them to the franchising industry, banking system, government and regulators, to develop a suitable strategy for meeting the credit needs of this widely growing business model. We expect to move ahead in this direction during the year. Another area where we propose to intervene in the coming year is cluster-based financing by devising special schemes for different clusters across the country.
How can MSMEs be a part of Narendra Modi’s “Make in India” campaign?
The government has announced the “Make in India” campaign to boost manufacturing sector, aiming to redesign manufacturing sector as a key engine for India’s economic growth. The government has identified 25 potential sectors under the campaign, which include pharmaceuticals, automobiles, auto components, IT and BPM, food processing, textiles and garments, chemicals and wellness. As MSMEs are an important part of several value chains, it is expected that they will play an important role in the government’s “Make in India” drive.
What is your outlook on the economic growth of the country?
The wide ranging reforms of the government have triggered the revival and growth of the economy. We see the confidence among investors gradually returning, and the momentum at implementation front building up. The macroeconomic environment is expected to improve in 2015- 16 with fiscal policy gearing to an investment-led growth strategy and monetary policy using available room for accommodation. Large decline in commodity prices and the benign inflation outlook for the near term should provide a boost to growth.
This article first appeared in the Indian edition of Entrepreneur magazine (August, 2015 Issue).