SBI Card launches ‘SimplySAVE Merchant SBI Card’ for easy short-term credit to MSMEs

In order to cater to their short-term credit requirements, the SBI Card has launched a ‘SimplySAVE Merchant SBI Card’ for micro, small, and medium enterprises (MSMEs).

“SimplySAVE Merchant SBI Card will ensure easier and timely access to formal credit to MSMEs as they contribute significantly towards the economic growth and job generation in the country. This service is an attempt to address MSMEs by providing interest-free short-term credit,” said Dinesh Khara, Chairman, State Bank of India.

For payments, the SimplySAVE Merchant SBI Card can be linked to various UPI-enabled third-party applications.

Serving more than 14 lakh MSME borrowers, SBI has been playing a pioneering role in financing the MSME sector.

Lending segments:

The four verticals in SBI’s MSME lending operations are SME Centre and relationship managers, supply chain finance, CGTMSE, and cluster financing.

At the SME centre, the bank wishes to identify weaknesses in the end-to-end process of loan origination, approval, and monitoring process, and suggest improvements in process flow and end-to-end digitisation for loans up to INR 1 crore.

For the supply chain finance (SCF) vertical, SBI wishes to benchmark current dealer/vendor financing SCF journeys with the “best-in-class world players and identify gaps.” The consultant will be required to develop value chain analytics capabilities, including an analytics framework on the lack of transaction flows of the existing current account (CA) base to generate leads for vendor and dealer onboarding.

In the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) segment, the bank is underlining the reason for the poor offtake of schemes and suggesting measures for improvement.

The bank expects the consultant to suggest a coordination mechanism with various government agencies for increased thrust in the cluster portfolio. SBI expects from the consultant to bring in new fintechs for partnering with the bank, among other things.

There are 1,170 relationship managers in SBI who, based on the needs, provide personalized services to MSMEs. The bank also has 1,100 specialised SME intensive and MSME branches.

Government policies and its role in development of MSMEs in India

The Union Government has been making a slew of efforts with an aim to thrust the Micro, Small, and Medium Enterprises (MSMEs) and achieve the 50 per cent contribution in the country’s economy. The MSME sector, which accounts for about one-third of the total GDP, is often termed the backbone of the Indian economy. MSMEs also contribute significantly in nation-building by employing a large number of unskilled and semi-skilled workers. India, along with the world, observes International MSME Day on June 27.

As per the government data, MSMEs comprise nearly 63 million enterprises, which contribute 45 per cent to the country's manufacturing, 40 per cent to exports, and provide employment to over 113 million people.

Role of Govt policies in fostering MSMEs in India

From ‘Prime Minister's Rozgar Yojana’ (PMRY) to ‘Atmanirbhar Bharat Abhiyan’, the government has long recognized the significance of the sector and has implemented various policies and initiatives aimed at fostering its development.

The ‘Prime Minister’s Rozgar Yojana’ was launched on October 2, 1993 and was aimed at providing self-employment to educated unemployed youths and women. The scheme provides subsidized financial assistance to set-up self-employment ventures in the manufacturing, service, and trading sectors.

Along with self-employment, the initiatives of the beneficiaries also contribute in creating more jobs in various micro, small, and medium sectors.

The scheme helps beneficiaries secure a loan of Rs two lakh for business projects and Rs five lakh for service or industry projects.

 Few parameters of ‘PMRY’

• The loan is available for all educated unemployed between the age group of 18-40 years; a 10 years relaxation for SC/STs, ex-servicemen, physically handicapped and women.
• Neither the income of the beneficiary along with the spouse nor the income of parents of the beneficiaries shall exceed INR 40,000 annually.
• Applicants must be permanent residents of the area for at least 3 years.

Like ‘PMRY’, there are other schemes of the government to boost the MSMEs. ‘Make in India’, for instance, aims to promote manufacturing, while ‘Startup India’ encourages entrepreneurial ventures. The ‘Atmanirbhar Bharat Abhiyan’ envisions a self-reliant India, with a strong emphasis on MSME development. Additionally, schemes like the CGTMSE and PMEGP have provided financial support and incentives to these enterprises.

Make in India

To transform India into a global manufacturing, design, innovation, and investment destination, the central government in 2014 came up with an initiative called ‘Make in India’. The initiative advocates for developing a robust manufacturing system in India.

Adding more to the numbers, the revamped Make in India 2.0 presently focuses on 27 sectors and is implemented across various ministries/departments of the central and state governments.

The government also provides 80 per cent subsidy to MSMEs under the ZED Certification scheme. The aim of the scheme is to inculcate Zero Defect & Zero Effect (ZED) practices in manufacturing done by Indian MSMEs.

Due to Make in India Initiative, FDI equity in?ow in the manufacturing sector between 2014-2022 has increased by 57 per cent over the previous 8 years i.e. 2006- 2014.

 Skill India

Launched in 2015, the main objective of ‘Skill India’ or the ‘National Skills Development Mission of India’ programme was to provide market-relevant skill training to the youth of the country in order to enable employment in relevant sectors. The scheme was also meant to increase productivity.

The government provides a variety of training courses to enhance the productivity of MSMEs, which include Management and development programmes, training of trainers, Entrepreneurship development programmes, skill development programmes and other skills. With trained individuals entering the workplace, a quality growth in the sector can be achieved.

As per the data presented by World Economic forum, investment in upskilling could potentially advance India’s economy by USD 570 billion and add 2.3 million jobs by 2030.

Along with these schemes and policies, in order to achieve the goal of self-reliant India, the government has set up various tool rooms and training centres in parts of the country.

As per the information shared by Union Minister Narayan Rane, a tool room situated in Bhubaneswar manufactured nearly 54,000 aero-space components of 437 types and played a crucial role in the recently launched Chandrayaan 3.

Rane also said that in nine years MSME tool rooms and training centres have provided training to as many as 16 lakh youth.

Challenges faced by MSMEs

Despite their significance, MSMEs in India face a multitude of challenges that hinder their pace of growth and sustainability. These include limited access to finance, technology adoption barriers, complex regulatory compliance, and difficulties in accessing larger markets.

Disruption in business operations due to failure in managing the cash flow can be challenging for the MSMEs. One of the many challenges includes bad strategic planning before starting a business, leading to inefficiency and missed opportunities.

Last year, a survey conducted by Meta-Ipsos showed that one-third of the surveyed small and midsize businesses (SMBs) in India faced difficulty in using digital tools due to lack of required knowledge and training.

Role of government policies in addressing the challenges

Government policies have been instrumental in addressing these challenges. For instance, the introduction of online loan application processes has improved access to finance. Simplified regulatory compliance procedures and digital platforms have eased administrative burdens.

In the Union Budget 2023-24, the Department of Expenditure under the Finance Ministry had introduced a program called ‘Vivad se Vishwas I – Relief to MSMEs’ to offer assistance to Micro, Small, and Medium Enterprises (MSMEs) during the COVID-19 pandemic. The scheme aimed to provide relief to MSMEs affected by the pandemic.

Refunding enterprises’ amount related to performance and bid security, and liquidated damages deducted by government and its undertakings during the pandemic were among the targeted issues of the scheme.

The scheme was aimed at providing relief to MSMEs that failed to fulfill their contractual obligations during the Covid period.

Conclusion

India’s MSME sector appears promising and upcoming policy changes and trends, including digital transformation, further simplification of the application process, and sustainable practices, are expected to shape the future of MSMEs.

In conclusion, government policies have played a vital role in nurturing the MSME sector in the country. By addressing challenges and creating an enabling environment, these policies have contributed significantly to the growth and development of MSMEs, further propelling India's economic progress.