The burden of bank finance documents cripple the speed of projects implementation in msme

Date: 31st Dec 2017……hoping for a better tomorrow The Burden of Bank Finance DOCUMENTS Cripple the Speed of Projects Implementation in MSME’s Are we missing the bus?

A lot has been said and heard about banking reforms, ease of doing business, digitization, etc etc….. But the ground reality has some very fundamental blocks which have inhibited and delayed industry investment and business growth.

Will like to present a few situations without naming the organisations and the banks. a. Financing remains PERSON driven:  The decision to fund any project is still PERSON oriented, and not system oriented. It is still the Branch Manager or the Regional Manager who holds the key to funding of any project.  The risk taking ability of robust and strong financial institutions depends on the appetite or ability of the PERSON at that moment in that situation.  Projects have been delayed by 3 to 4 months and sometimes have to be shifted to another bank o with change in guard (new person, starts all over again), o change in philosophy (what one manager considered fundable, another considers high risk) o manager nearing retirement age – does not want NPA in their name o new person did not find sufficient “documents” to secure the credit/loan  It is so disheartening, that the head of one of the prominent and most important Industrial financing bodies of government changed, and the whole perception of funding changed. The experienced project financing peoples comment was “forget getting finance from this agency till this “X” person is at helm”…..  Those financing projects first find who is the decision maker in financing, what are their powers, what are their limits before approaching any bank.

It is true that ultimately the HUMAN intervention or ability to take risk is important at banking level, BUT NOT AFTER SPENDING 3 Months of paper work and then suddenly being told “SORRY” conditions apply! b.

Humungous Documents Need  Past references, credibility, archives….why these have no relevance.  Same document has to be signed multiple times  Probably 1000 signatures by the director….without understanding the fine print!  The connect with govt focus of ease of doing business is missing. While Govt is implementing digital locker inspite of having to do a major overhaul, the modern banks, and particularly the private banks have still to go through the archaic systems sighting it as “Guidelines”

In my small career of 25+ years in Projects, where new project has few commonalities viz: 

Bank finance – which bank, what interest, how much collateral, preparing DPC (Detailed project reports), adjusting numbers, getting the documents together, personal & corporate



guarantees……the reason of delay in bank financing can be any, but more than 90% of the projects over the years have always suffered on account of this.

Land, Pollution, Factory Act…..so may clearances to start a factory. In certain regions, acquiring and making a boundary is 1 year and sometimes agreement is made with 100 landowners. The licenses, clearances….you never know which of these will put a road block.

Even as late as 2017, we have done our own project, and a lot of new projects – not one project is smooth in all cases. One of the project was signed up, execution within 3 months, bank verbal clearance given. It is after 3 months that the client had to change the bank, as they needed 2 months to make transactions after the payment. This means the project which was to start production activity in October, will start in March…5 Months of loss of opportunity, business ----- who is going to bear the brunt. The MSME of course!!

Lot of surveys by leading financial and industrial institutions are done….but is something changing fundamentally?

Are we still going to give credit to those who have the money or the muscle? Do we really want our MSME’s to grow and grow fast, or continue to struggle and grapple with the Financial Burdens.

At the end….inspite of all the rules and regulations, we still have NPAs, those who do not have intent to pay, never pay, and it is as usual only the HONEST Businessman or Entrepreneur who suffers. So what if we have highly sophisticated rules, is it helping?

Our financial guru’s need to relook and redraft our roadmap, else India is on the verge of MISSING the BUS.