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Telangana MSMEs can avail higher credit facilities

Telangana MSME

MSMEs in Telangana, who are GST compliant, can look forward to availing higher credit facilities from banks and NBFCs.

This was stated in a pressnote issued by S. Swaminathan, CEO of IRIS Business Services Limited, a GST Suvidha Provider (GSP) here today. “Given that the state already has a credit deposit ratio of over 115 % which is well above the national average, the state should now try to focus on the Credit GDP ratio to spur growth,” he said. In fact, Telengana can take the lead in the country by being the first to leverage the benefits of GST to promote lending, especially to its 24 lakh MSMEs. The state can enable a MSME focused and GST led credit offering which can be combined with targeted incentive structures such as interest subvention and credit guarantees, he added.

S Swaminathan is an economist trained at Yale University, USA, he served as a Consultant to the World Bank in Washington DC before returning to India to first co-found a software company. He then went on to pursue a career in the media, serving in senior positions with India’s leading financial daily, The Economic Times and later with the country’s leading magazine, Business India. He founded IRIS in 2004. IRIS Business Services Limited is one of the first provider of full professional XBRL products and solutions to organizations globally. The company headquartered in Mumbai, India with international offices in United States, Singapore, United Kingdom, and the UAE.

According to KV Srinivasan, the Founder & CEO of Profectus Capital, an NBFC with operations in Telengana, more and more finance companies are now willing to fund MSMEs on the basis of the sales reported by them in their monthly GST returns. “We would ask for collateral as we had no independent means to verify their sales figures. But now if borrowers are willing to share their monthly GST returns with us, it a completely different story altogether,” Srinivasan said.

Independent studies reveal that 92% of MSMEs in India lack access to formal finance. It is also estimated that a credit gap of 56% exists in the MSME sector for India as a whole. This is because, traditionally, lending by banks and finance companies has always been against collateral. If manufacturing MSMEs are unable to provide sufficient collateral and have always therefore been under funded, it is even more so for those in the services sector.

With the introduction of GST, all of this is set to change. “ As a GSP, we can help filers access their verified returns  which they can then submit to the lender to access finance,” said Swaminathan, explaining the role of IRIS as a GSP. IRIS Business Services Limited of Navi Mumbai, a leading GST Suvidha provider (GSP) is at the forefront of ushering in this change and is in the process of putting together a consortium of lenders to address this issue. Lenders may now access the GST filings of a borrower and their eway bill data as well, with the consent of the borrower.

“We have presence in Telengana already and are confident of rolling this out very soon,” says Srinivasan.  Swaminathan revealed that as many as ten other NBFCs including new age Fintechs are gearing up to follow suit very quickly for a pan India rollout of their SME lending program based on GST filings.

Elaborating on a role for the state government, Srinivasan said that they could popularise it by helping organise awareness camps across the Industrial estates across the state through the state finance corporation and the industries department.  He said that it would also be good to try and formulate a policy to bring it under the Mudra guarantee scheme to attract more funds and quickly.

Swaminathan pointed out credit to GDP ratio for India as a whole stands at a dismal 55.7% compared to China’s 208.7 %. “With GST one can catalyse a dramatic increase in credit offtake, leading to the democratisation and formalisation of credit  across India and specifically in Telengana,” Swaminathan added. According to him, the service sector has always been under served by banks and NBFCs and a special focus on them has the greatest potential for job creation.

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