Banks urged to ensure large firms make payments to SMEs on time

The perennial problem of delayed payments to small and medium enterprises by large Indian corporates was highlighted by a senior official of the Reserve Bank of India in Bangalore on Thursday.

Delivering the keynote address at the SME CEO Knowledge Forum organised by The Hindu BusinessLine , in association with UTI Mutual Fund and Karnataka Small Scale Industries Association, RBI Regional Director Uma Shankar said banks must “exert (the) influence” that they enjoy with large industrial houses to ensure prompt payments to their SME clients. SIDBI and KPMG were associated with the event as “knowledge partners.”

Ms. Shankar said small enterprises do not have the “muscle power” to force large companies to ensure that they comply with their obligations. Timely payments are a matter of the SMEs’ very survival, she observed. “Bankers or banks should step in to help them to survive,” she added.

Ms. Shankar said a large proportion of the SMEs are “one-man shows,” lacking the ability or resources to advertise or market their products. Of course, funding is a major problem for such enterprises, she pointed out. The RBI had always urged banks and specialised institutions such as the SIDBI to earmark a certain proportion of their credit disbursements for small enterprises. However, she also urged SMEs to function with a greater sense of discipline.

Ram Nath, Chief General Manager, SIDBI, urged SMEs to stop seeking subsidies and instead ask for “competitive rates”.

“Running an SME is not an easy task,” said B.P. Shashidar, president, KASSIA. He said there is tension and anxiety but there is also the thrill and satisfaction of making a contribution to society.

Bharath L. Ghia, Country Head, SME & Distribution Channel, UTI Mutual Fund, urged SMEs to explore the option of investing in mutual funds, which provide better returns when compared to bank deposits.

Explaining the purpose of the forum, the former Editor, The Hindu Business Line , D. Sampath Kumar said event recognised the importance of innovation in the modern business enterprises. By providing a platform for “knowledge sharing” among SMEs, the event hoped to make them recognise the importance of innovation.