SMEs are always on a forefront for the economic development of the Nation and putting efforts for creation of large employment, industrial output, large contribution for exports and converting unskilled labour to skilled labour. Despite significant contributions of the SMEs, this sector continues to face certain constraints like availability of adequate and timely credit, high cost of credit, collateral requirements, access to equity capital and rehabilitation of sick enterprises etc. It thus emerges that adequate, timely and affordable finance is one of the bigger issues for the SMEs. SMEs usually depend upon the Banks, Financial Institutions, HNIs, Private Finance and other sources to generate capital or working finance as well as funding for expanding business activities.
Without adequate capital and sufficient working finance, SMEs cannot put efforts for economic growth, acquire advanced technologies, cannot compete with global players in India and world market. Normally, Financial Institutions are hesitant to fund SMEs unless their priorities are addressed by SMEs. In this regard, SMEs should be assisted largely by public initiatives involving participation of the banking industry. Efforts to harmonize the standards and practices, therefore, need to be properly coordinated to facilitate SME finance further. The regulating authorities have a very important role to play in this matter. We have observed that after demonetisation, SMEs are most affected and facing tremendous hurdles to get finance from banking sector.