Banks should review loan policy towards MSMEs: RBI official

A top RBI official today asked banks to review their loan policy towards Micro, Small and Medium Enterprises (MSMEs), badly hit by the economic slowdown.    

"One has to be sensitive to the sector and put in a revised policy', RBI Deputy Govenor Usha Thorat said in her address at a conference here.    

Noting that MSMEs were the 'worst sufferers' when disaster strikes, she said there was need to provide special relief to the sector on the lines of National Equity Fund, recommended by the Dr Chatraborty committee.    

The downturn had affected MSMEs by a slump in demand for exports and services, besides a build up of large inventory, delayed payments and slowdown in remittances, Thorat said.    

About 12.8 million MSMEs in the country provide employment to over 300 million people and accounted for 39 per cent of the manufacturing sector and 33 per cent of exports, she said.    

She said RBI had taken 'unprecedented' measures to ensure liquidity and credit flow to MSMEs to help the sector during the recessionary period now and added that a special refinance facility under Section 17 (3B) was also extended to them.    

Thorat, speaking at a one-day conference on 'learning from recession, saving an economy: Towards an MSME agenda', said the central bank has also given in principle approval to set up four new credit information companies.

The conference was organised by the Institute of Small Enterprises and Development (ISED), RBI, the Union ministry of Micro, Small and Medium Enterprises, Ministry of Finance and state Industries department.   

Dr P M Mathew, Director ISED and Member secretary, International Network on SMEs in Local Economic Development- India, Prof B Yerram Raju, Visiting Fellow, ISED, Dr Kamal Nayana Kabra, Chairman ISED, Samuel Joseph, General Manager, EXIM Bank, Mumbai, Zareena Sheikh, Regional Manager, Export Credit Guarantee Corporation of India Ltd, also spoke.