Banks reluctant to lend to MSME sector: Mishra

Says this is despite provision of collateral, and against RBI guidelines

Stating that credit flow towards the MSME sector is inadequate, Union Minister Kalraj Mishra today said banks are reluctant while sanctioning loans to entrepreneurs belonging to the sector.

"The flow of credit to the micro, small and medium enterprises (MSME) sector is not adequate. They (MSMEs) are facing huge difficulties while availing loans from banks.

"Despite the provision of collateral free, banks don't sanction loans, causing distress to small entrepreneurs, ignoring RBI guidelines," Mishra said at an Assocham event here.

Mishra told PTI that he has written to the Finance Ministry in this regard and is awaiting a response from them.

"MSMEs Ministry is willing to take responsibility and we have urged various other state governments for Credit Guarantee Fund Trust and are collecting the funds to ensure that banks do not hackle entrepreneurs and instead take up the issue directly with the Ministry," Mishra said.

The Ministry of MSME, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the micro and small enterprises (MSE) sector without the need for collaterals/ third party guarantees.

According to a RBI circular, banks are mandated not to accept collateral security in the case of loans up to Rs 10 lakh extended to units in the MSE sector.

As per another circular, banks may, on the basis of good track record and financial position of MSME units, increase the limit of dispensation of collateral requirement for loans up to Rs 25 lakh with the approval of the appropriate authority.

The Minister further said that the MSME Ministry is working on a format to streamline the process of filing entrepreneurs' memorandum (EM) through an online system.

Earlier, while speaking at a CII event, Mishra said the expected manufacturing renaissance was beset with challenges of infrastructure like power, ports, railroads coupled with a shortage of trained human capital and public sector control.

The government's New Manufacturing Policy, he reiterated, has the vision to enhance the share of manufacturing in GDP to 25 per cent within a decade and creating 100 million jobs on a sustainable basis.

"Key policy instruments for achieving the above objective include establishment of National Investment and Manufacturing Zones, self governing and autonomous bodies for industrial townships and proposals to improve access to finance for SMEs in the manufacturing sector," he added.