The Reserve Bank of India (RBI) has told commercial banks to adopt a cluster-based approach for financing small- and medium-sized enterprises (SMEs).
The RBI has said that banks should have a full-service approach to cater to the diverse needs of the SME sector. This could be achieved through extending banking services to recognised SME clusters by adopting a 4-C approach - customer focus, cost control, cross-selling and containing risk.
The RBI said that a cluster-based approach to lending might be more beneficial in dealing with well-defined and recognised groups, availability of appropriate information for risk assessment and monitoring by the lending institutions.
