MSMEs Present Significant Opportunities for UCB Sector: RBI DGM

In a recent workshop on Capacity Building for Urban Cooperative Banks (UCBs) in Telangana, Prabhuti Samal, Deputy General Manager at the RBI’s Department of Supervision in Hyderabad, noted the extensive potential for UCBs in the MSME sector. As of March 31, 2023, UCBs in India had disbursed Rs 2.20 lakh crore in loans, with Rs 1.30 lakh crore directed specifically towards MSMEs.

Samal underscored that traditional loan options like mortgages and gold loans limit growth opportunities. He emphasized the importance of diversifying lending portfolios, pointing out that, “Approving a Rs 10 lakh loan with Rs 20 lakh in collateral is not sustainable. For CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) coverage, UCBs need to provide collateral-free loans up to Rs 10 lakh.” He recommended that UCBs revise their loan policies accordingly, adding that the ongoing Capacity Building program plays a vital role in this process.

Samal also highlighted the state’s MSME policy, which aims to expand Telangana’s MSME base to 25,000 units, and the proposed MSME Park planned between the Outer Ring Road (ORR) and Regional Ring Road (RRR). These initiatives present significant lending opportunities for UCBs.

Madana Gopala Swamy, Working President of the Telangana Urban Cooperative Banks Federation, raised concerns over the exclusion of UCBs from State-Level Bankers’ Committee (SLBC) meetings. As of September 30, 2024, Telangana’s UCBs have loaned Rs 6,289 crore, with Rs 4,000 crore allocated to the MSME sector.

Swamy expressed frustration over UCBs being ineligible for government subsidies and benefits, which restricts their ability to provide competitive loans to MSMEs. This often leads MSME borrowers to seek loans from scheduled banks instead. He questioned why UCBs are omitted from major lending programs despite the mandate to achieve 75% lending in Priority Sectors by 2026. He called for an evaluation of these policies to promote UCB eligibility in initiatives like MUDRA and KVIC schemes.

India’s MSME landscape comprises around 6.5 crore units, with 3.9 crore registered under UDYAM and 1.3 crore registered for GST.

Disclaimer: This article is intended for informational purposes only. While we strive for accuracy, readers should verify details and consult with professionals for specific financial or regulatory advice regarding UCB and MSME operations.