Government makes it easier for MSMEs to get loans

The Reserve Bank of India has advised the banks to achieve 10% annual growth in number of micro enterprise accounts and also to allocate 60% of the MSE advances to the micro enterprises, says the Minister of State for Micro, Small and Medium Enterprises.

The Dollar Business Bureau Small-Business-The-Dollar-Business Based on the recommendations made by the Prime Minister’s Task Force report on Micro, Small and Medium Enterprises (MSME), the Reserve Bank of India (RBI) has asked the banks to achieve 20% year-on-year (Y0Y) target in credit to the MSMEs. This was informed by Giriraj Singh, Minister of State for MSMEs, in his written reply to the Rajya Sabha on Thursday, according to an official release. The RBI also advised the banks to achieve 10% annual growth in number of micro enterprise accounts and also to allocate 60% of the MSE advances to the micro enterprises. Besides this, the Indian government’s Credit Guarantee Fund Scheme for Micro and Small Enterprises will also facilitate the easy flow of credits to MSMEs, the Minister added. The Ministry also implements the Prime Minister’s Employment Generation Programme and Credit Linked Capital Subsidy Scheme, wherein margin money and capital subsidy respectively are disbursed to bring down the effective cost of loan. The MSMEs and the Small Industries Development Bank (SIDBI) have also established a Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which provides a guarantee cover to the registered banks, against credit facilities up to Rs 100 lakh sanctioned by them to the MSEs, under its Credit Guarantee Scheme (CGS). According to the RBI’s 2010 guidelines, it was made mandate for the banks to dispense with the collateral requirement for the loans up to Rs 10 lakh. As on March 31, 2015, a total of 18,17,245 proposals have been approved for a total amount of Rs 90445.90 crore, the Minister added. The Task Force reports on MSMEs provide a roadmap for the development and promotion of the MSME sector in the country. According to the report, the sector holds 45% share of the country’s manufacturing output, 40% contribution to the exports and in total accounts for 8% of country’s GDP. The report further says that the labour to capital ratio and the overall growth in MSME sector is much higher than that of the large industries and so, the sector is very important for national objectives of the growth with equity and inclusion.