Bank credit to MSMEs increases by 26% to Rs.1,91,307 crore as on 31st March 2009

To facilitate the promotion and development of micro, small and medium enterprises (MSMEs) and enhance their competitiveness, the Government announced a ‘Policy Package for Stepping up Credit to Small and Medium Enterprises (SMEs)’ on 10th August 2005 which envisages public sector banks to fix their own targets for funding of MSMEs in order to achieve a minimum 20 per cent year-on-year growth in credit to the MSME sector.

The Government also announced in February 2007 a ‘Package for Promotion of Micro and Small Enterprises’ with an objective to provide support in areas of credit, technology upgradation, marketing, infrastructure etc. Further,

keeping in view the impact of global economic slowdown on MSMEs, the Government, the Reserve Bank of India (RBI) and the Public Sector Banks have taken several measures for protecting and providing a stimulus to the MSMEs which, inter alia, include: (i) extending the loan limit under Credit Guarantee Scheme from Rs.50 lakh to Rs.1 crore with a guarantee cover of 50%; (ii) increasing the guarantee cover under Credit Guarantee Scheme from 80 per cent to 85 per cent of credit facility up to Rs.5 lakh; (iii) interest subvention of 2 per cent in pre and post-shipment export credit to small and medium enterprises (SME) sector; (iv) refinance limit of Rs.7,000 crore to Small Industries Development Bank of India (SIDBI) for incremental on-lending to the micro and small enterprises (MSE) sector; (v) grant of need-based ad hoc working capital demand loans up to 20 per cent of the existing fund-based limits; and (vi) reduction in interest rates for borrowing by micro enterprises by 1 per cent and in respect of SMEs by 0.5 per cent.

These have resulted in increasing the outstanding credit to micro and small enterprises sector from public sector banks from Rs. 1,51,137 crore as at the end of March, 2008 to Rs.1,91,307 crore as at the end of March 2009.

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