SME Times is powered by   
Search News
Just in:   • Equity indices break two-day losing streak on value buying  • IMF urges Sri Lanka to tighten monetary policy  • Global semiconductor sales to reach $676 bn this year: Gartner  • Tinna Rubber hits upper circuit, investors accumulate 900% returns in year  • Availability of jobs in Japan improves for 1st time in 3 yrs 
Last updated: 10 Mar, 2015  

Rupee.Bag.9.jpg Credit crunch: RBI puts forward 'solution'

Rupee.9.jpg
   Top Stories
» Net direct tax collection reaches highest-ever figure in FY 22
» Musk has to manufacture here to sell Tesla cars in India: Gadkari
» Round tripping of industrial inputs by large players unfavourable to local value chains
» Sitharaman engages investors in Silicon Valley
» Modi hails India's success in achieving target of $400 billion of exports
Bikky Khosla | 10 Mar, 2015
The RBI has recently released a report on priority sector lending which puts forth a number of recommendations on lending to the micro, small and medium enterprise (MSME) sector. Financing is one of the most lingering and difficult problems facing the sector and in the light of this I think any development in this front is worth keeping track of. In addition, the report contains some suggestions to enhance credit to the export sector - another issue that attracts no less attention from us.

One of the major steps proposed is the extension of the priority sector lending status to medium enterprises in addition to micro and small enterprises. The suggestion sounds reasonable - the suffering is no less significant in case of the medium sized enterprises when it comes to availability of credit. At the same time, the report proposes the introduction of a sub-categorization within the definition of micro enterprise and a separate 7.5% of adjusted net bank credit sub-target for micro enterprises. If implemented, this move will help make sure that the micro enterprises are not crowded out.

The report adds that priority sector lending status should stay with MSME units for up to three years after they grow out of the category of MSMEs. It will encourage MSMEs to not remain small merely to be eligible for PSL status. The proposal is also in alignment with the 2012-13 budget announcement that non-tax benefits may be made available to a MSME unit for three years after it graduates to a higher category. A few years ago I raised this issue on this platform and hope this time the Centre will pay heed to the apex bank recommendations.

On exports lending, the report recommends incremental export credit from a base date to units having turnover of up to Rs. 100 crore, having sanctioned credit limit of up to Rs.25 crore from the banking system to be included in priority sector. I find the proposal grossly inadequate as it ignores the long-standing demand of exporters to include export in priority sector lending. The Padmanabhan Committee clearly suggested for the latter and was far more detailed on measures to boost credit to the export sector.

I invite your valuable suggestions. What further measures do you think can be taken to solve the problem of credit crunch and high interest rates for MSMEs and small exporters?
 
Print the Page Add to Favorite
 
Share this on :
 

Please comment on this story:
 
Subject :
Message:
(Maximum 1500 characters)  Characters left 1500
Your name:
 

 
  Customs Exchange Rates
Currency Import Export
US Dollar
66.20
64.50
UK Pound
87.50
84.65
Euro
78.25
75.65
Japanese Yen 58.85 56.85
As on 27 Apr, 2022
  Daily Poll
COVID-19 has directly affected your business
 Yes
 No
 Can't say
  Commented Stories
 
 
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter