Term loans to MSMEs to exceed Rs 148k cr in 11th Plan

Bank term loans to India’s micro, small and medium enterprises (MSMEs) during the 11th Plan are expected to be Rs 148,720 crore if GDP growth during the plan period averages 9 per cent a year, according to an estimate by the Small Industries Development Bank of India (Sidbi).

Average GDP growth of 8.5 per cent a year would mean a reduced term loan total of Rs 143,915 crore, and GDP growth of 8 per cent would entail a term loan total of Rs 139,808 crore, according to Sidbi.

However, access to this money is not going to be easy, since MSMEs continue to face challenges that include stiff credit appraisal procedures, non-availability of collateral and margin requirements.

Speaking on the sidelines of a seminar on ‘Finance Availability for MSMEs’, organised by Confederation of Indian Industry (CII) last week, Chitra K Alai, general manager of Sidbi, said, “Working capital requirement of MSMEs in 2011-12 would be around Rs 311,803 crore, as against Rs 267,172 crore in 2010-11 and Rs 228,888 crore in 2009-10.”

Quoting from the Reserve Bank of India’s Handbook of Statistics on Indian Economy and the Government of India’s Annual Survey of Industries, she said working capital requirements as a proportion of total advances by scheduled commercial banks were 80 per cent in the 10th Plan, and this is expected to come down to 70 per cent in the 11th Plan.