U GRO Capital CFO calls for new NBFC category to boost MSME financing

Kishore Lodha, Chief Financial Officer (CFO) of U GRO Capital, has advocated for the creation of a new category of non-banking financial companies (NBFCs) exclusively dedicated to serving the needs of the micro, small, and medium enterprises (MSME) sector.

Lodha suggests the establishment of an NBFC-MSME category, drawing parallels to existing classifications such as NBFC-MFI (Microfinance Institutions) and HFC (Housing Finance Companies). He highlighted the urgent need for specialised designations to address the distinct financial requirements and challenges faced by MSMEs. The CFO also stressed the importance of offering special treatment and relief to exclusive MSME lenders.

"NBFCs exclusively engaged in MSME lending don't receive any special treatment from lenders or regulators, either on the asset or liability side. So, if we can create a separate class of NBFCs exclusively dedicated to MSMEs, with lower risk weights and special liquidity windows, it would greatly benefit MSME borrowers," Lodha said in an interview with ETCFO.

"The MSME sector needs to grow significantly, and creating a separate category would help bridge the credit gap in the MSME segment," he added.

U GRO Capital's CFO pointed out the necessity for dedicated interventions from both the government and the Reserve Bank of India (RBI) to alleviate the liquidity crunch experienced by MSMEs.

"In addressing the pressing liquidity issues within the MSME sector, we urge both the government and the RBI to consider the establishment of special liquidity windows," stated Lodha. "These tailored initiatives would provide much-needed relief to MSMEs grappling with liquidity constraints."

The government has consistently implemented various initiatives to bolster the MSME sector, recognising its pivotal role in driving overall economic growth. "MSMEs are vital for the economy, not just in India but also in larger economies," said the U GRO Capital CFO. "In countries with more developed economies, MSMEs contribute closer to 50 percent of the GDP, whereas in India, their contribution stands at around 30-31 percent."

"There remains substantial untapped potential for the growth of MSMEs in India," said Lodha. "Moreover, this sector is the largest employer in the country." Highlighting the government's acknowledgment of the significance of MSMEs, Lodha expressed confidence in the potential impact of targeted actions aimed at fostering credit growth, business expansion, and employment generation within the MSME segment.

U GRO Capital's Vision: Leading the MSME Financing Landscape

U GRO Capital aims to become the foremost MSME financier among NBFCs in India. "Our goal is to be the largest MSME financier in India among NBFCs. With the infrastructure, technology, data science capabilities, skilled workforce, and physical infrastructure we have in place, we are confident in achieving this objective," said Lodha.

Special Initiatives

U GRO Capital has undertaken various special initiatives to not only support MSMEs but also to promote environmental sustainability. "We have been conducting impact assessments of our lending activities, focusing on employment generation, social impact, and environmental sustainability," Lodha highlighted.

Furthermore, the company has introduced innovative products such as financing for rooftop solar and water sanitation, aiming to make a positive environmental impact. Additionally, it is actively engaging with global partners to assist MSMEs in adopting sustainable practices.

Top Priorities of the CFO

The CFO outlines the top priorities for U GRO Capital, emphasising a strategic focus on growth, innovation, and governance. "Our focus will remain on growing our assets, diversifying borrowings, and leveraging data and technology across all operations," said Lodha. Furthermore, the company will closely monitor emerging trends and macroeconomic events that could influence the industry.

"Maintaining robust governance, creating growth opportunities, and ensuring adequate disclosures for our stakeholders are my primary areas of focus," added Lodha. This commitment underscores U GRO Capital's dedication to responsible business practices and transparent communication with stakeholders.