Govt in talks with RBI to explore ways to improve credit flow to MSMEs

The MSME ministry is in talks with the Reserve Bank to explore ways to improve credit flow to micro, small and medium enterprises across the country, a top government official said on Thursday.

"In order to ensure that credit flow for MSMEs is up to the expectation, gaps are bridged and their problems are addressed, the ministry is holding discussions with the Reserve Bank of India (RBI) about promoting fintech companies which can reach out much better than the scheduled commercial banks to the MSMEs all across India," MSME Secretary S K Panda said.

He also said the ministry is looking at measures to address issues pertaining to decline in exports.

"The MSME ministry will constitute a special task force to look at exactly what steps are needed to be taken to enhance exports from the enterprises to make them part of the global value chain," Panda said while addressing an Assocham conference here.

He said the quantum of credit guaranteed by the Credit Guarantee Fund Trust For Micro and Small Enterprises (CGTMSE) may touch Rs 500 billion this year.

We have taken some decisions, we are allowing NBFCs (non-banking financial companies) partial collateral and this year, unlike previous years where, from fund we used to guarantee a credit flow of Rs 190-200 billion every year for last three years, we plan to cross Rs 400 biilion, it may touch Rs 500 billion Panda said.

He also said the MSME ministry has taken certain concrete steps as part of structural reforms and is thus expecting about four lakh such credit proposals, according to a release issued by Assocham.

Noting that MSMEs comprise almost 95-96 per cent out of the one crore entities registered in the Goods and Services Tax Network (GSTN), Panda said a database is needed to communicate and tell them about the facilities which they can avail.

In the ministry, we are trying to work with GSTN so that we can have an integrated database where we can communicate with MSMEs if we have their details and work on the problems faced by them, he said.

He said the ministry will seek support of state governments to put up details of MSMEs on the Samadhan Portal so that payments due to small enterprises do not get stuck.

Besides, EXIM (ExportImport) Bank managing director David Rasquinha suggested RBI to look at further dialogue with the Ministry of Finance and the International Basel Committee to find a way to make trade finance more reflective of the actual risks rather than a perceived artificial framework which relies predominantly on rating.