RBI views sought on lending limit to MSMEs

The finance ministry sought the views of the Reserve Bank of India to increase the banks’ mandatory lending limit to the micro, small and medium enterprises to help the sector stem the impact of the global downturn, a senior official said today.

“They (finance ministry) have asked for views of the central bank, so they are in the process of deciding,” Micro, Small and Medium Enterprises (MSME) Secretary Dinesh Rai told reporters on the sidelines of Assocham function here.

He said the ministry has requested to increase the mandatory bank lending to 15 per cent from the current 12 per cent as they are getting requests from several SME associations and industry people for the same.

On February 3, the Reserve Bank had asked public sector banks to enhance credit flow to fund-starved MSMEs and restructure their accounts in a time-bound manner at the MSME Advisory meeting held between RBI Deputy Governor Usha Thorat and heads of leading public sector banks.

The central bank had also asked lenders to provide adequate credit to large corporates to help them make timely payments to MSMEs.

The sector provides employment to over 42 million people. The MSME sector accounts for 45 per cent of the country’s factory output and 40 per cent of exports.