Reserve Bank calls for dedicated SME verticals at banks

Asks them to focus on volume growth

The Reserve Bank has asked banks to set up dedicated verticals to help small and medium businesses to deal with financial matters.

“An SME-promoter knows the product, but he doesn’t know finance,” RBI Deputy Governor K C Chakrabarty said, at a seminar organised by the SME Chamber of India here.

Banks, which have long-term association with such SMEs as lending partners, can further this relationship by providing consultancy on finance, cash-flow management, taxation and other related things for a fee, he said.

“I think this is a product innovation, which needs to  be done by banks and it needs to be done across the globe,” Chakrabarty, whose responsibilities include customer services, said.
A desk should be available centrally that will help SMEs and can handle multiple SMEs, he said. SMEs will have to pay for such service, he said. “I am not saying anything is free, you charge them for that.”

However, banks should eye volumes in the business and ensure that the costs are low, Chakrabarty added.

He also came down hard on the high interest rates charged by banks in lending to Small & Medium Enterprises, asking if they can be compared with rates charged to corporates. As a matter of proper governance, Chakrabarty said, “I will be happy if banks disclose this in the balance sheet.”