Govt considering interest subvention scheme for MSMEs

Micro, small and medium firms, the backbone of the country’s industrial production, may get up to 2 per cent interest subvention on institutional finance in the backdrop of slowdown in the employment-oriented activities.

“We are considering something like an interest subvention for the micro, small and medium enterprises (MSMEs), as there is a demand coming up for it again and again,” a senior official in the MSME ministry told PTI.

At present, only the exporters in the MSME segment are given the concession interest rate on bank finance. The government, which is bearing the financial burden of the interest subvention, has extended this scheme for the exporters till March 2010.

However, the MSME industry, which contributes 45 per cent of the country’s industrial output and employs 42 million people, has demanded that interest subvention be extended to the domestic units as well.

“We are looking at various options for making available easy credit for the sector,” the official said.

Referring to the SME exchange being planned by Reliance Money, he said, it would help companies in raising money and fulfilling their credit needs.

Earlier, while taking charge as MSME minister, Dinsha Patel, had said the ministry would propose a separate fund for the unorganised sector, besides a ‘Procurement Policy’, which would set target for the government departments and institutions to source their requirements from the tiny and small units.

The minister also suggested earmarking of specific percentage of net bank credit for small enterprises under the priority sector lending targets.