In a move to promote and expand the micro, small and medium enterprise (MSME) sector in the country, the Finance Ministry has asked all public sector banks (PSBs) to speed up their lending for the MSME sector to achieve the target. The ministry has also observed that some PSBs are still not able to meet their targets even after completion of second quarter of this financial year.
“As we prioritise the MSME sector the most to increase the credit offtake, we have already informed the public sector banks to speed up their lending to the MSME sector. We have seen that some PSBs, including SBI have improved significantly. Therefore, we need more push from banks that are still lacking in this regard,” a top official in the Finance Ministry told The Pioneer.
The MSME sector contributes about 45 per cent to manufacturing output and accounts for about 40 per cent of exports according to the Ministry of MSME’s Annual Report for 2014.
“As the MSME sector, no doubt, forms the backbone of the economy, boosting this sector will certainly make the Prime Minister’s vision globally competitive,” he added.
According to the data available from the Finance Ministry, the credit flow in the SME sector, monitored regularly by Reserve Bank of India (RBI) and Finance Ministry, the credit growth from April to December 31, 2014 has marginally gone up only 1.24 per cent to 7.63 lakh crore.
“Only 8 PSBs have achieved more than 20 per cent year-on-year growth, while 9 PSBs have not been able to achieve any of the targets,” the data said.
As per RBI guidelines, 60 per cent of MSEs advances to micro enterprises was to be achieved in stages - 50 per cent in the year 2010-11, 55 per cent in 2011-12 and 60 per cent in 2012-13.
“Only 4 PSBs have achieved the 60 per cent target while 12 PSBs have achieved just more than 10 per cent y-o-y growth in the number of micro enterprises as on December 31, 2014,” the data added.
The official, however, said, “Some banks, including largest lender State Bank of India (SBI), are improving their lending space to the MSME sector. The main reason behind this growth is due to tracking non-performing asset (NPA) accounts in mostly SME segments.”
SBI said in its annual report 2014-15 on Tuesday that the bank also tied up with GE Capital for proactively making calls to stressed accounts (SMAs) in retail segment and real estate sector to prevent slippages. “SBI has Assets tracking centres at circle level to track and monitor probable NPA accounts (SMAs) in SME and agriculture segments, for making calls on the customers and follow up for recovery,” it said.
In order to encourage credit offtake, Mudra Bank, which was launched in April, is also looking at financing the MSMEs by way of refinancing to banks to the tune of Rs20,000 crore by the fiscal-end.
last month, the Union Cabinet chaired by the Prime Minister Narendra Modi, had approved signing of an agreement between India and Sweden to promote cooperation in the MSME sector which will open up doors of new opportunities for the domestic MSME sector by way of new markets, joint ventures, sharing of best practices and technology collaborations, among others.
The MSME sector, which employs over 106 million people in the country, is taking major strides in staying competitive and making the most of the opportunities that will contribute to the growth of the country’s economy. The MSME Ministry has so far entered into long-term agreements for cooperation in the MSME sector with ministries or organisations of 17 countries namely, Tunisia, Romania, Rwanda, Mexico, Uzbekistan, lesotho, Sri lanka, Algeria, Sudan, Cote d’lvoire, Egypt, Botswana, South Korea, Mozambique, Indonesia, Vietnam and Mauritius.