Lend more to micro enterprises, govt urges banks

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    Reported by Chinmaya Dehury/Edited by Swetaparna Mohanty

    Bhubaneswar, Aug 24

    Concerned at the persistently low credit flow to micro and small enterprises, the department of micro, small and medium enterprises (MSMEs) has asked banks, to enhance their lending to these two crucial sectors.

    In a recent letter to the convenor of the State Level Bankers’ Committee (SLBC), MSME Additional secretary FM Naik urged banks to adopt a ‘proactive’ approach in promoting and nurturing the sector.

    “Forty per cent of the total advances to MSE sector should go to the micro (manufacturing) enterprises having investment in plant and machinery of Rs five lakh and micro (service) enterprises having investment in equipment up to Rs two lakh,” the letter said.

    A departmental analysis for the years 2011-12 and 2012-13 revealed that as many as 11 out of 25 public sector banks, along with four of seven private banks and four of six regional rural banks, have posted negative growth in credit flow to the MSE sector. Nine public sector banks have shown negative growth in MSE accounts.

    If all banks had shown positive growth in credit flow, he overall target for credit flow to MSE sector could have been achieved by now, the letter said.

    The recommendation of the Prime Minister’s Task Force on MSMEs for a minimum of 20% annual growth in credit flow to MSEs and 10% in MSE accounts has been observed more in its breach. The stipulations have not been met even by the end of the quarter ending June, 2013.

    Sources in the department said the reluctance of banks, particularly private banks, to lend more to the crucial sector has seriously affected the state government’s ambitious plans to promote entrepreneurship among the youth and generate maximum employment.