Orissa SMEs seek 15% bank credit

The Small and Medium Enterprises (SMEs) in Orissa, reeling from the impact of recession, have sought 15 per cent of the net credit of banks to be earmarked for the micro, small and medium enterprises (MSMEs) sector in the state. The SMEs feel that the move will ensure a higher credit flow to the sector which is facing a liquidity crunch due to the global meltdown.

They have urged the state to set up a task force for identifying potentially-viable sick units, adoption of a cluster approach for financing, provision of loans at differential rates of interest (DRI) to the backward districts, bringing the Orissa State Financial Corporation (OSFC) under the Credit Guarantee Scheme (CGS) and sanction of fresh loans to entrepreneurs who have cleared the payments under the One Time Settlement (OTS) of OSFC.

These issues were raised by Sarat Sahoo, chairman of the Co-ordination Committee of Industries Association (CCIA), in the special monthly State Level Bankers’ Committee (SLBC) meeting on ‘Increasing the Credit Flow to MSME, Housing and Auto Sectors’.

Making a strong plea, Sahoo said, the small scale industries in the state are passing through a difficult phase. The banks can help these units by financing the OTS amount. Since the entrepreneurs will repay the loan to the banks concerned in installments, this will be a win-win situation for both the banks and the entrepreneurs.

Arguing for the revival of the small scale industral units in the state, Sahoo said, the state government should form a task force with representatives from the banks and also industry bodies.

This task force will identify the potentially-viable sick units in the state and it will be asked to submit its report within three months, he suggested.

Niranjan Mohanty, president, Utkal Chamber of Commerce and Industry (UCCI) said, the SMEs need additional capital to pay for their imports and to meet the growing working capital needs. In this context, the norms of non-performing assets (NPA) should be modified to increase the period of declaration of NPA to 180 days from 90 days at present.

Responding to suggestions of entrepreneurs in the SLBC meeting, V S Das, executive director, RBI said, with the priority sector lending capped at 40 per cent of the adjusted net bank credit, it is not possible to fix sub-targets for the MSME sector.

Since the agricultural advances were fixed at 18 per cent, advances to weaker sections was 10 per cent and advances at diffential rates of interest was 1 per cent of the net bank lending, increasing the MSME loan percentage to 15 per cent will badly hit lending to subsectors like housing which creates a lot of employment .

On the issue of changing the norms for declaration of NPAs, Das said, reverting back to the 180-day norm for the purpose will be a retrogressive step as this norm has been achieved after a great deal of initiatives.

Stating that private sector banks are also covered by the guidelines dictating priority sector lending and they should lend to the MSME sector, Das said, if their advances to the SME sector is low in Orissa, the regional director (RD) of RBI will convene a meeting of the private banks operating in the state to discuss the problem.

He, however, promised to take up the demand of the SMEs in the appropriate forum in the RBI.

M N Rao, chief general manager, State Bank of India, Orissa circle, S M Sinha, general manager, Uco Bank and Sourav Garg, secretary, industries department of the Orissa government spoke on the occasion.