“We have to build the MSME sector back better. Let’s build it better than what it used to be”, Sen said Tuesday evening in Kolkata at an event of
to mark its 7th anniversary. “Although corporate India is growing very strongly, the non-corporate sector is not – in fact, it is damaged”, he said while delivering an address on `build back better — the role of finance”.
He argued that it’s the non-corporate sector which creates jobs in the country of 140 crore while corporate India is largely capital-intensive.
To support MSME, he called for strengthening the architecture of India’s financial system through a greater partnership between banks and non-banking financial institutions (NBFCs). “Banks are essentially deposit taking institutions while NBFCs are essentially lenders. Banks’ ability to apprise projects, especially small projects, is extremely poor,” he said.
“The relationship between a bank and an NBFC should not merely be of a lender and a borrower as it is today, each of these entities need to leverage their core competence,” he said, adding that this would ensure financial architecture to work better.
To be sure, the Reserve Bank of India in 2020 allowed banks and NBFCs to co-lend to the priority sectors such as agriculture; MSME, education and housing.
Sen’s perhaps underscored the need for such partnerships gaining momentum and extending the co-lending model to the non-priority sectors as well.
In the past couple of years, a large chunk of MSMEs‘ businesses moved to the big companies as the government pushed formalisation of the economy, helping India Inc to enjoy pricing power, even as the corporate sector reflects merely 10% of the economy, Sen said.