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Punjab govt to help MSMEs overcome credit squeeze
Ties up with private bank for ‘better fund flow’
With small businesses facing a liquidity squeeze, the Punjab government has switched gears to make efforts to ensure credit facilitation for the micro, small and medium enterprises (MSMEs) in the state.
The state government, which sees an opportunity in the job-creating MSME sector to spur industrial and economic growth, has created an interface between the MSMEs and private sector lenders to provide “ease of access to finance”.
The Punjab Bureau of Investment Promotion has entered into an agreement with HDFC Bank, which has ramped up its lending to smaller businesses, for assured funding to more than 550 MSME units for starters.
“The bank will disburse loans at the Progressive Punjab Investors Summit next month. It will ensure faster and online processing of loans with special rates of interest and processing fee waiver. This access to finance will act as a catalyst in the growth of MSME units,” additional chief secretary, investment promotion and industries, Vini Mahajan told HT.
She said this was one of the steps taken by ‘Invest Punjab’, a one-stop facility set up by the Punjab Bureau of Investment Promotion, towards providing all facilitation to connect MSME units with the financial institutions. The theme of the summit being organised in Mohali on December 5 and 6 is ‘Building Partnerships for Inclusive Growth – MSMEs in the Global Value Chain’ with agro and food processing, healthcare, manufacturing, new mobility, plastics and petrochemicals and IT-enabled services being some of the thrust areas.
The state has over 2 lakh registered MSME units in sector-specific clusters for agriculture implements, sports goods and surgical implements in Jalandhar, auto components, hand tools, machine tools and hosiery in Ludhiana, foundry, heavy engineering, rolling mills and industrial shafts in Mandi Gobindgarh, etc.
The credit growth across smaller businesses has reported a slide in the past two-three quarters due to liquidity crisis faced by non-banking lenders despite steps taken by the government to give a push to lending and cut rates.
The credit growth in micro and small enterprises segments shrank more than the medium businesses segment in the first six months of the current financial year, said a banker who did not want to be named.
In its report to the Reserve Bank of India (RBI) in June 2019, an expert committee on MSMEs also said that despite an ongoing policy focus, growth of MSME credit has been weak and years of mandated lending have not produced enough progress. “The risks in lending to MSME sector are high...neither risk mitigation mechanisms are available to MSMEs, nor to their lenders,” it said.
