Employees use sewing machines on a production line at the CBC Fashions Pvt. factory in Tiruppur, Tamil Nadu, India (Photographer: Dhiraj Singh/Bloomberg)

Government In Talks With RBI To Find Ways To Improve Credit Flow To MSMEs

The Ministry of Micro Small and Medium Enterprises is in talks with the Reserve Bank to explore ways to improve credit flow to small businesses across the country, a top government official said today.

“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 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 was looking at measures to address issues pertaining to a 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 in New Delhi.

He said the amount of credit guaranteed by the Credit Guarantee Fund Trust For Micro and Small Enterprises may touch Rs 50,000 crore 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 19,000-20,000 crore every year for last three years, we plan to cross Rs 40,000 crore, it may touch Rs 50,000 crore.
S K Panda, MSME Secretary

He also said the ministry had taken certain concrete steps as part of the structural reforms and was expecting about 4 lakh such credit proposals, according to a release issued by Assocham.

Noting that MSMEs comprise 95-96 percent of the 1 crore entities registered in the Goods and Services Tax Network, Panda said a database was 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 (Export–Import) Bank Managing Director David Rasquinha suggested the 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.

Also read: Small Businesses Remain Upbeat On Growth Prospects