and inventory management. e - commerce has also virtually opened the entire globe for the entities to market their wares. so, instead of competing against large multinational companies, the msmes can take advantage of the opportunities afforded by e - commerce to access new and distant markets or global value - chains. c ) utilizing alternate sources of finance the msmes have always lamented lack of institutional finance as an impediment to their growth. however, lately few alternate sources of finance have become available in the market as a supplement to bank credit. the common forms of alternative finance include crowd - funding, invoice trading, peer - to - peer or marketplace lending, angel investors etc. similarly, nse has a sme platform for entities whose post issue paid up capital is less than or equal to rs. 25 crores. the platform allows new, early stage ventures and small companies to raise much needed growth capital as they grow and mature. alternative finance tend to be more transparent about fees and eligibility as well as flexible in terms of payment. alternative finance allows businesses to use different assets for security. this is particularly very handy for service industries that can secure loans against the value of their unpaid invoices, rather than tangible assets such as property or stock. spreading awareness about the availability of these alternate sources of 3 / 6 bis central bankers'speeches finance however, remains a challenge which must be addressed by the industry associations. d ) seeking credit rating a credit rating can make a msme unit ’ s access to financial services more efficient as it provides transparency, helps overcome perceived uncertainty in lending decisions and thereby reduces time and transaction costs. msmes can use ratings to enhance their credibility with other counterparties too, such as technology providers, suppliers, and customers. in this context, having proper documentation would be extremely critical. a related aspect that the lenders need to be mindful of is that msme is a vast universe comprising of several million micro enterprises without elaborate system of account - keeping. hence, standard ratio analysis would be an ineffective mode while apprising their credit proposals. in such cases, the banks would need to look to assess their credit worthiness under a credit scoring model using unconventional matrix comprising of utility bill payments, remittance history etc. i would like to add here that adoption of ind - as will play a key role in enhancing the quality of ratings as better disclosures will increase information availability on rated companies. recent policy measures / work - in progress 9. the regulators

exposures to single borrowers or borrowers in the same corporate group and forcing the large borrowers to meet their fund requirements from market borrowings rather than from banks. under the circumstances, it would make sound commercial sense for the banks to look at msme sector as a potential growth area. 5. therefore, with favourable ecosystem in the manufacturing / services sector, msmes can pave the way for fulfilling entrepreneurial ambitions and in the process would be able to generate significant levels of employment. yet providing adequate and timely finance at reasonable rate of interest to these 50 million units at the bottom of the pyramid has remained an elusive goal. it must be appreciated that to realize the country ’ s aspirations for a double - digital growth, it is crucial that the potential of msme sector is optimally tapped. 6. before coming to the theme of the summit proper, let me briefly touch upon few major reasons for the sector ’ s limited access to institutional credit. these include – small ticket size loan which renders these accounts operationally less profitable, lack of information about the operations of these enterprises and financial illiteracy among the small enterprise owners. due to unavailability of timely as well as flexible institutional credit, a number of msmes fail to tide over temporary setbacks and eventually have to shut shop. with the above background, in my address today i intend to outline some mantras for the bankers and the borrowers that need to be pursued for ensuring vibrancy of the msme sector in emerging environment. i will also dwell upon 1 / 6 bis central bankers'speeches few recent policy measures that rbi and government of india have taken for the sector and also some measures in the pipeline. mantras for bankers 7. in my opinion developing empathy for micro, small and medium borrowers and understanding their financial and other related needs is the first and foremost mantra for the bankers. this can obviously be achieved if the top management is convinced about the potential of the sector and treats msme lending as a priority for sound commercial reasons. developing business sensitivity towards such entrepreneurs would require focused capacity building through training interventions. a ) appreciating the life cycle needs of the msmes micro and small units are more prone to financial difficulties than large enterprises / corporates. often absence of timely support at crucial junctures during the operating lifecycle of msmes leads to their sickness. the banks need to be sensitive in providing continuous support to viable mses during phases of transient financial difficulties. towards this