There is good news for the field functionaries of banks and financial institutions who have been resisting lending to entrepreneurs, fearing prosecution from the authorities in
the case of default by the borrowers.
Punjab National Bank PNB, in alliance with Small Industries Development Bank of India (Sidbi) and six other public sector banks, are planning a credit rating agency to specifically focus on the appraisal of small- and medium-sized enterprises (SMEs). In the long term, credit appraisal of SMEs by this agency will be made mandatory for accessing funding from banks and financial institutions.
The credit rating agency is expected to go a long way in pushing the morale of the field functionaries, which will, in turn, push up the credit flow to the SME sector. With the role of the appraiser outsourced to the agency, banks will actually play the role of a monitoring agency, considering the routing of cash flows through their counter.
