Monitor loans to SMEs, states told

At time when growth in loans is showing signs of moderating, the Union government has asked states to closely track the flow of bank credit to micro, small and medium enterprises (MSMEs).

In a communication to banks and state governments in the western region, the finance ministry said governments should closely monitor the progress of credit flow to the MSME sector.

Finance minister Pranab Mukherjee would review the state-wise flow of bank credit to agriculture, housing and the MSME sector with chief ministers of western states, including Maharashtra and Gujarat, in Mumbai on Saturday.

According to Reserve Bank of India (RBI) data, bank credit to the MSME sector rose 33.7 per cent, touching Rs 484,473 crore at the end of March. At Rs 362,291 crore, it had grown 41.4 per cent in 2009-10.

The ministry said states should be actively involved in securing more MSME loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises' credit guarantee scheme. They, together with banks, should also devise schemes for cluster/location specific industry groups to ensure greater credit flow, it said.

Credit flow to the sector is monitored by the central bank the ministry of finance. RBI had, in November 2010, announced many measures to augment credit flow to MSMEs. The allocation of 60 per cent of MSME advances to micro enterprises was scheduled to be achieved in stages.