MSMEs may find it easier to raise funds
Banks looking at proposal to make movable assests eligible to be used as collateral for lending to small companies.business Updated: Jul 15, 2014 23:10 IST
To ease up financing requirements for the micro small and medium enterprises (MSMEs), lenders are looking at a proposal to attach moveable properties such as existing inventories too as collateral.
At present only immovable assets such as real estate are taken as guarantee.Though a final decision is yet to be taken on the issue, sources said that the proposal if accepted will give a larger headroom to the cash strapped SMEs to borrow from banks. A meeting to discuss the issue would take place soon.
Most government banks have adopted a cautious approach towards the MSMEs and they are closely monitoring the performance of all loans given to the small and medium enterprises with the level of non-performing assets rising significantly. While the finance ministry and the Reserve Bank of India have asked banks to focus on lending to SMEs—as they create thousands of jobs--most bankers said they have not performed too well with the economic slowdown.
“It is important to come out with new ways to ease financing in the sector…the proposal to attach movable properties as collaterals can help to a large extent,” Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME) told HT.
“The loan books of all SME accounts are being monitored on a regular basis to ensure there are no fresh slippages,” a chairman and managing director of a large public sector bank, who refused to be identified, said.
While all public sector banks are expected to allocate at least 55% of credit to MSMEs and register a 10% annual growth in the number of accounts, most banks have failed to achieve this target.