The Hindu : Business : NCEUS seeks modifications in RBI norms on small enterprises

Online edition of India's National Newspaper
Thursday, Nov 08, 2007
ePaper

Business

Business

NCEUS seeks modifications in RBI norms on small enterprises

Staff Reporter

Report on financing of enterprises in the unorganised sector released

5 p.c. of net bank credit should be lent to micro units
Call for creation of a national fund for the sector

NEW DELHI: The National Commission for Enterprises in the Unorganised Sector (NCEUS) on Tuesday sought modifications in Reserve Bank of India (RBI) guidelines on small credit enterprises to help the growth of micro enterprises and the non-farm unorganised sector firms.

Releasing the report on “Financing of enterprises in the unorganised sector”, that was submitted to Prime Minister Manmohan Singh on Monday, NCEUS Chairman, Arjun Sengupta, said the RBI guidelines on small credit enterprises were being flouted by banks. “Only about four per cent of the non-farm unorganised enterprises have access to institutional credit. Micro enterprises which contribute up to one-third of the national gross domestic product (GDP) receive just five per cent of the bank credit,” he said.

Mr. Sengupta said the present flow of credit to small units was due to government-sponsored programmes, otherwise the unorganised sector was left to fend for itself, he added.

The report prepared by the Commission, falling under the Ministry of Micro, Small and Medium Enterprises, states that despite RBI guidelines to provide security-free loans up to Rs. 5 lakh, only 26 per cent of the loans had been advanced without collaterals.

NCEUS has also called for the creation of a National Fund for the Unorganised Sector (NAFUS) giving the organisational model, functions and sources of financing.

“NAFUS has been envisaged as a statutory body funded by the Central Government and financial institutions that will primarily focus on non-farm micro enterprises with an investment of less than Rs. 5 lakh,” said Mr. Sengupta.

The commission has recommended that the Government should make it mandatory for banks to lend five per cent of their net bank credit to micro enterprises having an investment of less than Rs. 5 lakh.

Observing that while large enterprises pay only 6-7 per cent interest, small units are charged 16 per cent for loans above Rs. 2 lakh, NCEUS suggested that micro enterprises should be provided credit at an interest rate of 7 per cent on loans up to Rs. 3 lakh. It also said that the limit of loan for action under the Bank Securitisation Act should be raised from Rs. 1 lakh to Rs. 5 lakh.

NCEUS also suggested that a multi-purpose “Swarozgar Credit Card” should be issued for unorganised sector enterprises.

Printer friendly page
Send this article to Friends by E-Mail

Business