Credit disbursement by banks has fallen short of proportional annual credit plan target by about 10 per cent in the case of lending to the predominant SME sector in the district for the first half of the current financial year ended at September 30.

For the period, credit to the sector stood at Rs. 1,491.75 crore against the plan target of Rs. 1,653.86 crore.

According to experts, the figures are a matter for concern when it comes to analysing the ‘health and prosperity' of the industrial activities in the coming days.

Lead District Manager R. Rajagopal attributed the sluggishness in the lending to various operational problems encountered in Tirupur knitwear cluster like the dyeing sector crisis.

“It is seen that new companies have not been coming up and very less people are going for expansion of business in the knitwear sector, which is mainly comprising small and medium scale enterprises (SMEs), for the past many months,” he said.

Interest rates

Senior chartered accountants like S. Dhananjayan were of the opinion that the main reason for the shortfall lies with the decisions taken by Reserve Bank of India in the last one-and-a-half year by which short-term rates (repo and reverse repo) were raised as many as 13 times in the pretext of containing inflation.

“The rise in the short-term rates saw the interest rates going up by almost six percent in 18 months which is the major factor that kept away the businessmen in the SME sector for obtaining loans to widen their production capabilities,” Mr. Dhananjayan pointed out.

According to him, RBI should look for real causes that triggers inflation instead of trying to suck out the excess liquidity by increasing the bank interests if they wanted to rejuvenate the SME sector.


Amid the worries, there are causes for consolation as credit to agriculture sector in the district has exceeded the proportionate annual plan targets for the first half of this fiscal.

The credit disbursement to agriculture and allied sectors stood at Rs. 455.62 crore against Rs. 451.11 crore.