Small biz loans in poor growth, RBI moves to aid
In an age when the country’s banking sector is doling out home and auto loans even over phone calls, micro, small and medium enterprises (MSME) that play a vital role in the growth of the economy seem to be struggling for financial help from banks.
While the home and auto loan segments registered a year-on-year growth of 12% and 20% respectively by September 2012, the micro and small enterprises (MSE) had only 7% and the worst performance was by the medium enterprises sector — a mere 0.6% increase over 2011.
The apathy of majority of banks and financial institutions to lend to MSMEs is an age-old issue.
And, the government’s assurances have apparently failed to change the situation.
The hurdles small entrepreneurs face while procuring bank loans for new units can be better understood from the story of Greater-Noida based entrepreneur Sushil Goel.
“My loan proposal was denied thrice by a public sector bank in 2004, because despite repeated efforts I failed to convince the branch manager about my electronic equipment project, I had planned to set up,” said Goel.
Taking cognizance of this fact and also taking into account finance minister P Chidambaram’s emphasis on increasing priority sector lending, the standing advisory committee of the Reserve Bank of India (RBI) has recommended for setting up of centralised credit processing (CPC) cells.
While instructing the banks to set up CPC cells for MSMEs, the deputy governor RBI, KC Chakrabarty said that these cells would act as a single-point appraisal, sanction, documentation, renewal and enhancement of loan mechanism.
“This arrangement will help to reduce delays, respond to multiple queries, develop fair practices and easier tracking,” he said.
“If the cell is created, it will positively help MSMEs due to a concerted effort and ensure faster sanctions and disbursement of loans,” said the president of the Federation of Indian Micro, Small and Medium Enterprises (FISME), VK Agrawal.