RBI’s Gandhi slams bankers for neglecting SMEs

Mumbai, Aug 17 (PTI) Reprimanding lenders forneglecting small businesses, Reserve Bank Deputy Governor RGandhi today said banks can survive only if they are sociallyrelevant and look beyond immediate profitability goals. "If you make yourself socially relevant, not justrelevant in an economic sense alone, you can have hopes toexist," Gandhi said at the annual banking summit FIBAC heretoday. Pointing to banks’ reluctance in SME financing, Gandhisaid lenders are being disintermediated by non-bank entitiesfrom fintech and marketplace lending companies by usingthe best of technology. "One big area you’ve vacated and have let othersoccupy by your lacklustre attitude is SME financing. "If only banks can change their current reluctantattitude towards SME financing, they can be a good antidotefor these risks (emanating from newer tech-enabled companies)and will display their socially relevant role, which in turn,can justify their existence in the future," he warned. Later, when asked about the digital investments madeby banks, Gandhi said these are not in keeping with long-termgoals of staying relevant but guided more by short-termconcerns of profitability. "Banks are looking at digital technology from aprofitability angle alone, that will not be able to justifytheir existence," he told reporters. Gandhi said technology is available to assesscreditworthiness of a small scale entrepreneur and warned thatstandard methods used by banks will not be sufficient. Quoting a recent International Finance Corporation(IFC) report, Gandhi said SME financing is a USD two trillionopportunity in the emerging markets alone and added that eventhough bank credit to this segment is growing, more has to bedone considering the relevance of the sector to the economy. "While banks may have urgent need to identify newavenues for growth and the need to embrace new informationtechnologies, what is of paramount importance is a positiveshift towards increased recognition of the social sectorresponsibilities," he said and referred to the "much maligned"mandatory priority sector lending requirements. PTI AA HV BENNRB JM ABKBAS