SBI Chairman pitches for dedicated institutions to track end-use of funds raised by small businesses
State Bank of India chairman CS Setty on Friday pitched for the creation of a market infrastructure institution to track the end-use of funds borrowed or raised as equity by small businesses. A «viable mechanism» is needed to ensure that the funds are used for the intended purposes, Setty said in remarks which come amid heightened concerns on the subject of end-use of funds.
«We will require a viable mechanism to track the actual use of these funds to ensure that the funds are utilised for the purposes they have been raised for, probably through the establishment of a separate market infrastructure institution with powers to track the use of borrowed funds or the funds raised through equities,» Setty said.
Addressing a conference organised by the Sebi-promoted NISM here, Setty said the creation of such a platform will provide comfort to lenders as well as investors, and make pricing more competitive.
It can be noted that the RBI has been pressing lenders to monitor end-use funds, especially in case of borrowings by small businesses.
In March last year, the central bank asked lenders issuing business credit cards to monitor the end use of funds. There have also been reports of some unsecured borrowings being used to punt on the riskier segments of the derivative markets.
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