Banks should ease lending norms for small units: Muniyappa

The central government would direct state-owned banks to ease lending norms to the micro, small and medium enterprises (MSMEs) so they can manufacture new products and compete globally, union Minister of State for MSME K.H. Muniyappa said Thursday.

"We will instruct banks to ease norms for advancing loans to the MSMEs so that they can manufacture newer products for domestic industries and to compete with countries like Germany and China in export markets," Muniyappa said at a meeting here.

Admitting that the sector was at crossroads due to challenging macro-economic conditions and difficulties in raising funds, Muniyappa told about 300 entrepreneurs from across Karnataka to invest in research and development (R&D) for innovating new products and solutions required by the manufacturing sector.

"As the sector lags behind its counterparts in Germany and China, the ministry will facilitate bank loans and help build skills to manufacture products for diverse verticals and expand capacity to meet the demand within the country and compete overseas," Muniyappa said at a 'MSME Connect Programme', organised by the Confederation of Indian Industry (CII).

Lauding the CII's strategy to help micro and small scale units to expand their capacity and product portfolio to become a part of the medium and large enterprises, the minister said the Reserve Bank of India (RBI) had already directed banks to enhance credit flows to the MSME sector on the recommendation of the prime minister's task force.

"The sector should invest in expanding its product range and enhance production capacity than using bank finance for meeting working capital and contingencies," Muniyappa said.

The CII has recently initiated a novel programme to educate about 100 MSME firms selected across the country on performance basis and for whom the government has introduced a credit guarantee scheme under which 85 percent credit is granted without collateral up to Rs.1 crore.

The minister also assured the entrepreneurs of directing the state-run Small Industries Development Bank of India to grant funds from the Rs.5,000-crore venture fund that was announced in the 2012-13 union Budget but not set up yet.

CII president and Infosys vice-chairman S Gopalakrishnan said a cluster programme was being conducted to educate MSME entrepreneurs to explore better ways of production and finding new markets within the country and overseas.