SBI Chairman Supports Dedicated Institutions To Track End Use Of Funds Raised By Small Businesses

SBI Chairman CS Setty suggested on friday that a market infrastructure institution should be set up to monitor how small businesses use the funds they borrow or raise as equity.

Speaking at a conference organized by the SEBI-backed NISM, Setty said creating such a platform would give confidence to lenders and investors and make pricing more competitive. It’s worth noting that the RBI has been urging lenders to track how funds are used, particularly when small businesses borrow money.

He emphasized the need for a "viable mechanism" to ensure the funds are used for their intended purposes, amid growing concerns about the proper use of such funds.

Read also - SC Stays GST Notices On Online Gaming Firms & Casinos

CS Setty, said, "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."

In March last year, the central bank told lenders issuing business credit cards to track how the funds are used. There have been reports of some unsecured loans being used for risky investments in derivative markets. 

Setty said that significant capital will be needed to meet growth goals. Since young people will be a major source of this capital, mutual funds and primary markets must ensure that the money isn't directed toward risky derivative investments, as has happened in recent years.

He said that considering the importance of green financing, it's essential to identify the gaps in institutions that need to be addressed to raise funds with the least possible impact costs.

Startup Funding News: Your Gateway to Every Funding Update.

Latest Startup News: Stay updated with the latest startup news and trends. Your go-to source for startup ecosystem updates.

Startup Stories: Discover inspiring tales of startups overcoming challenges and achieving success.