Mumbai (Maharashtra) (India), August 22 (ANI): Observing the Forex Traders’ Anniversary on Thursday, Reserve Bank of India (RBI) Deputy Governor Swaminathan J said the financial sector should leverage digitisation in lending to help micro, small and medium enterprises (MSMEs).
The Deputy Governor stressed that the adoption of digital payment systems by SMEs is an opportunity, adding that banks should explore these opportunities. The Deputy Governor underlined the importance of the financial sector in promoting SME exports and called for tailored and targeted services for SMEs.
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He explained that the financial sector can provide significant assistance to SMEs by offering services such as pre- and post-shipment financing, factoring and invoice discounting.
“The financial sector can play a critical role in promoting SME exports by providing targeted support and tailored services that address the unique challenges these companies face in the global market,” he said.
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“We have seen significant progress in the end-to-end digitization of lending over the last few years, especially in the retail and to some extent in the SME sector. I would urge bankers to further explore these opportunities for greater digitization of their transactions with SMEs,” the RBI deputy governor added.
He further explained that financial institutions could shorten approval times and significantly reduce the cost of lending by using digital tools for application processing, verification and disbursement. He pointed to the data footprint created by these transactions and said a better risk assessment system could be developed.
“Providing finance after a thorough understanding of SMEs’ cash flows, including taking into account possible payment delays by their buyers, will ensure a correct assessment of the true working capital cycle and ensure adequate financing,” he said.
“Many small business owners lack the knowledge and skills to manage their finances effectively, which can hinder their growth. The sector can provide significant support to SMEs in managing risk through export credit insurance and currency risk hedging solutions,” the Deputy Governor said.
“While financial discipline is critical, the unique challenges faced by MSMEs – such as low capitalization, lack of scale, liquidity constraints due to late payments, volatile market conditions and external economic pressures – require a more sophisticated approach to assessment and follow-up,” he added, stressing the need for a more sensitive and empathetic approach to MSMEs.
The Deputy Governor also stressed the need to raise awareness and improve financial literacy among SMEs. (ANI)
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