Small Industries Development Bank of India (SIDBI) is looking to bring down the turnaround time for disbursement of loan significantly to 72 hours from the current average of around three months by focusing on digitising the entire process.

According to Sivasubramanian Ramann, Chairman and Managing Director, SIDBI, there is a need to conduct a proper due diligence and a complete risk assessment of MSMEs, particularly the smaller ones and this requires a lot of time as sufficient data is not available in most cases. However, SIDBI has been working on completely digitising the process beginning from loan application to assessment.

“Conducting risk assessment of MSMEs, particularly the smaller ones with a loan amount of ₹20-50 lakh, takes time. We were probably taking close to three months to assess a case but with the digitisation initiative that we have undertaken we have been able to bring it down to 10 days. It should further come down to 72 hours from the time of application to disbursement of money,” Ramann told BusinessLine on the sidelines of the inauguration of Assocham MSME facilitation centre at Kolkata on Friday.

This will lead to a volume growth in loan book for SIDBI apart from bringing down the turnaround time for MSMEs thereby leading to an overall growth in advances.

SIDBI’s direct credit portfolio, which includes loans and advances, grew by nearly 17 per cent to ₹11,581 crore as on March 31, 2021, as compared with ₹9,867 crore same period last year.

Direct credit accounts for nearly seven per cent of the total outstanding portfolio during FY21, and the remaining 93 per cent (₹1,44,628 crore) comes from indirect credit which includes refinance to banks, SFBs (small finance banks) and other financial institutions and assistance to MFIs (microfinance institutions) and NBFCs, according to the data available in SIDBI’s annual report 2020-21.

The digitisation of the complete risk assessment and underwriting process is currently being tested and should be ready for rollout by the end of this month, he added.

Credit demand from MSMEs

When asked about the impact of Covid-19 on MSME sector and the time it could take for them to turn around, Ramann said that some of the units which have got shut may not be able to come back in business immediately.

According to a recent survey conducted by SIDBI on the ease of doing business for MSMEs, nearly 67 per cent reported temporary closure for up to a three-month period during Covid in FY21. Over 50 per cent of the respondents who took part in the survey witnessed a decline of more than 25 per cent in their revenues during FY21.

“A fair number of the MSMEs which were shut may not be able to reopen. However, there is a lot of pent up demand (for credit) in the sector. The Reserve Bank of India and government has done everything they could (for the revival of the sector) and we can hope for a fairly quick revival,” he added.