Non-availability of institutional finance, low level of research and development and delays due to multiple level of clearances are stunting growth of small and medium enterprises (SMEs) in the country, industry body Assocham has said.
A survey conducted by Assocham on Indian SMEs revealed that despite government's instruction to the banks to grant loans of up to Rs 25 lakh to SMEs without any collateral, the sector still faced difficulty in securing loans.
"There has not been a single instance where SMEs have been granted loans by banks without any security," Assocham Small and Medium Enterprises Committee Chairman Bikky Khosla told reporters on Monday.
The government had earlier said SMEs with good ratings from grading agencies would be eligible in getting loans from banks on priority basis, but the scheme still remains to be practically implemented, the survey pointed out.
"Higher interest rates and cumbersome process in getting loans is a big challenge that the sector faces," Khosla said.
The survey also highlighted problems of multiple clearances that the sector had to adhere to, which led to corruption and other malpractices.
"Despite more than 15 years of liberalisation, the Inspector Raj remains a big problem for the SMEs and is also an impediment in its growth story," it said.
Excessive regulation and inspection is taking a toll on the performance of the SMEs since more than 15 per cent of their productivity is lost due to time taken in completing official formalities.
"A single unit in the SME segment has to face 38 levels of inspection by officials and with service tax and other taxes being introduced, this number can go up to 45," he added.