Technology is the future, and MSMEs need to adapt as much as possible, says

India’s MSME sector is the second largest employer in the country, second only to agriculture. The sector took a massive beating amidst the COVID-19 pandemic, with numerous surveys showing that the disruptions had impacted earnings by 20-50 percent and that micro and small enterprises faced the maximum heat. 

A year later, however, recovery is in the air despite the second COVID-19 wave. 

Charles Darwin famously said, “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.”

Sumant Rampal, Senior Executive Vice President, Business Banking and Healthcare Finance, HDFC Bank, believes that MSMEs have come out as clear winners in the COVID-19 war.

And this has been facilitated by their evolution – by bringing about certain changes in their existing structures, particularly going digital, in order to survive and thrive. 

As the country commemorates one year of the nation-wide imposed lockdown, SMBStory spoke to Sumant on how MSMEs survived the sink-or-swim situations posed by the pandemic, what lies ahead, and the role banks play in uplifting the sector.

SMBStory [SMBS]: It has been exactly one year since the lockdown was announced. How have your MSME customers fared? 

Sumant Rampal [SR]: It has been one year ever since I started working from home. I recall, last year, at this time we were all so worried about what would happen. We had started seeing a few signs of the weakness in the MSME sector in the last quarter of the last financial year, which started in January because we had started hearing about the impact in China and in some parts of Europe, so there was a general slowdown. However, we never anticipated that it would blow up like this.

Since nobody knew how this would play out we decided to deal with the situation by interacting more closely with our customers. At HDFC Bank, we created small teams and would have conversations with our customers through digital and physical channels. That gave a lot more clarity: how we felt they should conserve cash, what is the support that we could provide at that point of time, and how we were engaging with the government and the regulator. 

Consequently, the moratorium and other schemes rolled out by the government were very good steps. November and December saw the recovery numbers going up. People were going back to the factories, festivals like Dussehra and Diwali pushed demand and boosted recovery.

From my reading of our customer base, most MSMEs have come out as winners while fighting COVID-19. 

SMBS: How did the schemes rolled out by the government help the sector?

SR: The schemes under the Aatmanirbhar Bharat Stimulus Package are the best the government could offer, especially the Emergency Credit Line Guarantee Scheme (ECLGS). I really thank the government for having thought through this and executing it with the help of National Credit Guarantee Trustee Company (NCGTC). 

We have also seen sectors like agriculture and consumer durable do very well. Many enterprises in this sector have recovered by 80-90 percent; some have even recovered by 100 percent. There are others who have recovered by 65-70 percent. 

We need to understand that recovery doesn’t happen overnight, but we are seeing positivity. 

Now, with the second wave, the mood has been dampened but the good news is that the government has realised that a lockdown is not the answer. As a country also, we are much better prepared in terms of health infrastructure to handle the situation. 

SMBS: How is HDFC Bank becoming easily accessible to MSMEs through digital means? What endeavours has the bank undertaken for this sector?

SR: We are one of the top banks to have sanctioned and disbursed loans worth Rs 23,000 crore under the ECLG Scheme. We see ourselves as a beneficiary of technology and digitisation, and our focus has been to ensure that our MSME customers reap the same benefit. Today, any customer in the MSME segment can provide…