Progress made by commercial banks on releasing funds for micro, small and medium enterprises (MSMEs) would be reviewed at a meeting between Planning Commission member Arun Maira and the Indian Banks’ Association (IBA) here tomorrow.
“The Prime Minister’s high-level task force on MSMEs has made several recommendations for quick availability of credit. Credit is like oxygen. The realty is quite different as credit is not reaching to MSMEs and here banks can rework their strategy. I will discuss with IBA the initiatives taken by banks in this regard,” Maira, who heads a panel on credit availability for MSMEs, told Business Standard on the sidelines of a seminar organised by the Maharashtra Economic Development Council.
He said the focus should be on timely availability of credit, which would help MSMEs become competitive. He reiterated that the panel under his chairmanship would make attempts to remove hurdles in disbursement of credit to MSMEs.
According to the recommendations of the task force, 40 per cent advances to MSMEs should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs 5 lakh and micro (service) enterprises having investment in equipment up to Rs 2 lakh; 20 per cent of the total advances to the MSME sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs 5 lakh and up to Rs 25 lakh, and micro (service) enterprises with investment in equipment above Rs 2 lakh and up to Rs 10 lakh.
In June, the Reserve Bank of India released a circular asking banks to achieve 20 per cent year-on-year growth in credit to MSMEs. Besides, it said the allocation of 60 per cent of the MSME advances to micro enterprises was to be achieved in stages: 50 per cent in 2010-11, 55 per cent in 2011-12, 60 per cent in the following year. Banks have also been advised to open more MSME-focused branches at different clusters which can also act as counselling centres.