CII suggests short term measures to RBI for MSMEs

Industry body CII Wednesday suggested several short-term measures to the RBI for enhancing credit to the micro, small and medium enterprises.

In a statement, CII said MSMEs at present have been facing issues arising out of delayed decisions from banks on granting access to credit, additional collateral requirements, demand for personal guarantees, additional charges and conditionalities on bank guarantees.

Further, delayed payments and higher interest rates have also contributed to the financial stress faced by this sector.

While commending CII commends the government's response in addressing these issues faced by the MSME, the chamber has suggested several short term measures which should be taken by RBI to enhance credit to the micro, small and medium enterprises (MSMEs).

It recommended that Letters of Undertaking (LoUs) be permitted for Buyers' Credit for cases where the MSMEs are incurring capital expenditure.

CII has suggested a 'One, Turn Around Time (TAT)' for sanction and enhancement of limits for working capital or term loans be fixed at 15 days from the date of application and for disbursement, 15 days from the date of sanction.

Limit the collaterals sought by banks to 133 per cent of the exposure and elimination of the need for personal guarantees where sufficient collateral exists and personal guarantees should be sought only in case of collateral shortfall, are some of the other short-term measures recommended by it.

CII also suggested that MSMEs having no defaults should progressively receive discounts on the normal margin requirements and commensurate with their lower risk profile, similar to no claim bonus discounts for insurance.

Another recommendation is that RBI may allow banks to sanction Buyers Credit facility to MSMEs, wherever import of raw materials is being done under Letter of Credit.

With the government and the RBI working together to ensure availability of funds to MSMEs, CII said it is possible to see a brighter future for the MSME sector which accounts for more than 7 per cent of India's GDP, 45 per cent of total manufacturing, 40 per cent of exports and employing over 117 million persons.