Credit guarantee to MSEs to double at Rs 40K cr in current fiscal: Secy

The credit guarantee to the micro and small enterprises (MSEs) sector will double to over Rs 40,000 crore this fiscal under the Credit Guarantee Fund Trust for MSE, an official said today.

The micro, small and medium enterprises sector requires timely and low-cost credit, MSME secretary A K Panda said.

Stating that some banks are grappling with problems, he said the government is making efforts to reach out to other lenders such as non-banking financial companies (NBFCs) to enhance credit flow to the sector.

The government will also explore ways to utilise non-budgetary instruments, Panda said, adding that the growth rate of non-performing assets (NPAs) in the micro and small sector is much lower than the other sectors.

"During 2018-19, we are estimating the credit guarantee would definitely cross Rs 40,000 crore. We will try to touch around Rs 50,000 crore. Considering that Rs 40,000 crore will be 75 per cent of the total lending, if that is the case the overall credit in the MSE sector will be Rs 50,000-55,000 crore," he said.

The secretary observed that while under the Credit Guarantee Fund Trust for micro and small enterprises (CGTMSE), there was a credit guarantee of almost Rs 19,000-20,000 crore in the last 2-3 years.

He added that the government has introduced some structural reforms and is allowing NBFCs also to lend, besides enhancing the credit guarantee percentage from 50 per cent to 75 per cent.

Asked about reports of negative impact on the MSME sector post-demonetisation and rollout of GST from July last year, he said the growth in the country's manufacturing sector will reject the claims.

"I was told that in the GSTN, out of 1.14 crore registrations so far, an overwhelmingly large majority, more than a crore, would be actual MSMEs. It implies that many of them who were hitherto in the informal economic framework or set up are actually coming to the formal sector as they know this will benefit them," Panda said.

On GST refunds to exporters from the MSME sector, he said "things have definitely improved" after the finance ministry processed refunds due to exporters.

The secretary also pointed out a decision taken by the Union Cabinet earlier to provide loan assistance of up to Rs 1 crore to entrepreneurs as a second dose under the Prime Minister's Employment Generation Programme.

"If in the first instance, the entrepreneur has already repaid the loan and more loan assistance is required, we are going to provide a second dose of loan up to Rs 1 crore with a maximum capped subsidy of Rs 15 lakh," Panda said, adding that this will act as a huge incentive for those setting up new units.

The Cabinet had cleared continuation of PMEGP with an outlay of Rs 5,500 crore entailing a modification made in the scheme to include a second loan of up to Rs 1 crore to existing and better performing PMEGP units for upgrading with subsidy of 15 per cent.