RBI to provide banking services to all villages by 2015

Deputy Governor of Reserve Bank of India K.C.Chakrabarty has said involvement of micro, small and medium enterprises sector should be an integral part of policies aimed at achieving inclusive growth. He was releasing 'India Micro Small and Medium Enterprises Report 2010', brought out by Institute of Small Enterprises and Development here on Friday.

Apart from providing employment opportunities, the MSME sector plays a significant role in keeping the spirit of enterprise alive. Almost every village in the country has MSME units, but credit facilities offered by banks are available only in 35,000 villages. More than five lakh villages remain out of the purview of the amenity.

It could explain the existing situation of non-availability of credit to MSMEs. Adequate and timely credit is of utmost importance. The RBI's vision is to provide banking services to all the villages in the country by 2015.

The focus of policies on lending should be on non-exploitation of the poor and not on subsidised assistance. Subsidising would, in effect, deprive the poor of the existing facility, he said. Since banking is business and the cost of delivery is high, viability of the industrial units which enjoy the loan facility is important.

A unit which deserves loan, as per the bank's analysis, should get it. If there is lack of creditworthiness, measures should be taken to improve it. The society in general and institues such as ISED in particular, can play an effective role in improving the creditworthiness of units.

Mr.Chakrabarty said there were no policy gaps in respect of lending to MSMEs, though problems prevailed at the implementation stage. The banking sector was functioning effectively and there has been considerable increase in lending to the sector.

Noting that the global financial scenario is passing through a period of uncertainty, he said theories on recession and recovery were changing.

Later, talking informally to newspersons, he said caution has to be exercised on structural adjustments. Referring to the complexities in respect of Euro, he said it was an insignificant component in the Indian fiscal scenario. Devaluation of currencies was a global phenomenon. Issues on managing liquidity can't be a matter of public discussion.

Asked about the lending to MSMEs in Kerala, he said there was much scope for improvement.

T.O. Sooraj, Director of Industries and Commerce, Government of Kerala, said the poor emoluments paid to workers in the MSME sector should be a matter of concern. ISED Director P.M. Mathew, chairman K.N.Kabra and Senior Fellow Yerram Raju addressed the gathering.