Reserve Bank of India (RBI) is encouraging banks to extend credit to micro, small and medium-scale enterprises (MSMEs), according to S. Selva Raj, Deputy General Manager of the RBI, Chennai.
Speaking at an interactive meeting organised by the Coimbatore District Small Industries Association (CODISSIA) here on Wednesday, Mr. Raj said MSMEs were the second largest employment providers in the country, next only to agriculture. Further, 40 per cent of the country's exports were from these units.
Hence, they should get the right opportunities. The banks were extending a lot of credit to the sector.
The MSME sector was a heterogeneous group with units from different sectors such as bread making, grill making, manufacturing and Information Technology. While extending credit, the credit appraisal should be done for each unit.
Similarly, the problems faced by the MSMEs were also many. Under these circumstances, it was essential for the MSMEs and banks to co-ordinate, have a cordial relationship and adopt a holistic approach for the growth of the economy.
CODISSIA President M. Kandhaswami said the MSMEs faced several problems while taking a loan. About 60 per cent of their financial needs were met through bank loans. The units sought liberal sanction of working capital loans on the basis of the projected turnover, lower interest rate for MSMEs, linking raw material price to working capital loan and a tracking system for all documents handed over to banks.
The MSMEs also said the transaction charges should be reduced and the bank officials should be trained on the Credit Guarantee Fund for Micro and Small Enterprises.
The units would be able to obtain loan without collateral up to Rs. 1 crore under this scheme. Loans up to Rs. 50 lakh should be covered only under this scheme and it should be ensured that all commercial banks implemented it.
The Credit Linked Capital Subsidy Scheme should reach all the beneficiaries on time.