New Delhi, Mar 17 (KNN) Industry body PHD Chamber of Commerce and Industry (PHDCCI) has urged the Reserve Bank of India (RBI) to enhance credit access for small businesses and address operational challenges in trade finance, including inconsistencies in handling Letters of Credit (LoC).
In a meeting with RBI Governor Sanjay Malhotra on March 16, the industry body flagged inconsistent treatment of discrepancies in LoC documents by issuing banks.
PHDCCI President Rajeev Juneja said, “Banks sometimes refuse payment even when discrepancies are minor and have been formally waived by the LC applicant. This undermines the reliability of Letters of Credit as payment instruments. Arbitrary use of discretion by banks in accepting or rejecting discrepancy waivers creates uncertainty for suppliers and exporters.”
The chamber has requested the RBI to issue clear operational guidelines mandating banks to honour such documents, except in cases involving fraud or material risk. It also called for standardised procedures and documentation practices to ensure uniformity across banks.
Push for Higher MSME Credit Limits
PHDCCI also raised concerns over limited credit flow to micro, small and medium enterprises (MSMEs), particularly through non-banking financial companies (NBFCs).
PHDCCI Secretary General Ranjeet Mehta noted, “Considering the issue, it is earnestly desired that the credit given by banks to NBFCs for the purpose of on-lending to MSMEs should be treated as indirect finance to MSMEs eligible for classification under the Priority Sector lending of banks and the ceiling of Rs 20 lacs per borrower should be removed altogether or should be increased to at least Rs 1 crore per borrower, which would be equivalent to just the minimum working capital required by a Micro Enterprise with turnover up to Rs 10 crore as per the revised definition.”
Other Industry Concerns
The industry body also called for greater uniformity and digitalisation in banking documentation to improve ease of doing business.
Additionally, it flagged alleged unfair practices by rating agencies, including charging fees for future ratings even when not required. PHDCCI urged regulatory intervention to address such practices.
It further proposed the introduction of dedicated ‘MSME Credit Cards’ with standardised eligibility criteria and application processes to improve access to formal credit for small enterprises.
(KNN Bureau)
