A study reveals that SMEs provide banks an additional business opportunity of Rs 50,000 Crore. Crisil study on SME funding pattern makes it evident that scope has increased for banks to accelerate lending to the SME sector by over Rs. 50,000 crore.

It is the SMEs that will continue to bring economic growth and enhance business opportunity for banks. Lending to SMEs shall garner commercial advantages to banks. SMEs simultaneously will also grow and prosper by accessing bank funds. That will definitely have a positive outcome in terms of industrial growth, employment and creation of wealth. This has been convened by Ramraj Pai, director Crisil Ratings.

The smaller SMEs have greater funding opportunity as their turnover is less than five crore. Moreover, funding opportunity is found to be greater for banks in urban areas than their counterparts in semi-urban and rural areas.

Domestic banks are found to provide just 60 percent of incremental working capital requirement between FY07 and FY09. This is found to be in clear contrast to the common banking practice that accrues up to 75 percent of entity’s working capital requirement. So, now the SMEs have to cough up the remaining amount from their own efforts.

Incremental SME funding is thus considered to be a significant business opportunity for banks that has not yet been exploited. SMEs can grow their businesses at a much faster rate with the funds received from banks.