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Last updated: 29 Mar, 2016  

Rupee.9.Thmb.jpg MSME schemes: Where do the funds go

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Bikky Khosla | 29 Mar, 2016
Under the Credit Guarantee Fund Trust for Micro and Small Enterprises --  simply known as CGTMSE --  more than 22 lakh guarantees for an amount of over Rs 1 lakh crore have been approved since the scheme's inception. This information was given by our MSME minister in the upper house. In another written reply, the minister added that a fund of Rs.1,139 crore would be utilized during 2016-17 to assist 55,000 projects, under the Prime Minister Employment Generation Programme (PMEGP). These two schemes, as we all know, have high potential to promote entrepreneurship and generate employment, but the concrete results on the ground never seem to be satisfactory.

Complaints abound over the CGTMSE scheme. A few years ago, I raised the issue how MSME schemes have failed to benefit the sector and found an overwhelming disappointment over the poor implementation of  this particular scheme. They say the bank excuses can be anything -- "We have no information about this scheme", "We are not covering this scheme", "You need to be our customer for 10 years if you need such a scheme", "Give the collateral and get your loan approved",  "If you have any kind of property you are no longer eligible for such scheme", "Our corporate office has issued a circular that there is too much burden on CGTMSE", and so on.

A similar story goes on with the PMEGP. This credit-linked subsidy programme aims at generating employment by aiding traditional artisans and unemployed youths to set up micro-enterprises in the non-farm sector. Every year, funds worth thousands of crores of rupees are funneled into this scheme, but complaints are often raised that all is not well as far as the implementation goes. Allegations are often raised that the selection process is influenced by local politicians; corrupt officials demand bribes; qualified candidates are turned down and even unviable projects of undeserving candidates are accepted. As a result, deserving candidates hardly get loans and banks hardly get repayment.

The government has a number of other schemes and programmes for entrepreneurship development and MSME promotion, but ironically -- it is often pointed out -- they are on paper only. Leakages, loopholes, political interference, bureaucratic hurdles, corruption, cumbersome procedures are some big roadblocks. In this situation, just announcing blanket policies or sanctioning funds cannot be enough. A complete overhaul of the support mechanism is required. The Centre has to plan more at the micro-level and innovative thoughts must be given to prevent political influence and corruption and ensure that the scheme benefits reach the intended beneficiaries.

I invite your opinions.
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SAMPATHKUMAR | Wed Dec 27 04:41:27 2017

Ground realities are always different
Bhagawath Prasad | Sat Dec 23 07:11:08 2017
Definition of MSME in our country are as follows: Urban farmers , who produce taxes to government,employment to youth , funding agents for top corporates , easy to catch by middle level government officers.Inspite of knowing this governments are neglecting thsi sector by only throwing schemes that would be taken by top connected few , thereby stress is high on MSMEs

solar project
neeraj singh bisht | Wed Dec 20 05:13:09 2017
Dear sir i m thinking and trying to convey this is true but sometime horable truth like as awarenes,I hv more than 15 yrs exp in revelant field power and energy hw to arrangre fund whr I HV no garanter this responsibility our govt of India and state govt. To skill the person who is needy our govt and banks bounded scheme that reason I want to start up bisness approx 5 lakes than then your scheme allowed 75℅ i d'nt hv money a/c approx zero

DEEPAK-NOTME_63@YAHOO.CO.IN | Sun Apr 24 12:15:20 2016
Agree with the above comments, the major benefit was taken in andrapradesh, tamilnadau,Uttarpradesh,Kolkata, karnataka states by the well established known persons and actual msme entrepreneurs who deserve or should have been given benefit of the scheme at a proper time from the period 1994 to 2004 was not done either by the bankers or nbfc engaged to promote this scheme nor after disbursement of funds proper required monitoring was done to know why scheme could not help to generate good business for entrepreneurs or why entrepreneurs did not repaid on time to make scheme more beneficial. is there was misappropriation of fund that also not actually worked out. therefore i my opinion before launching of such schemes following should first get assembled and start off like what should be the product for which that scheme is to be launched, what portion of the total expected production shall be consumed directly as well as indirectly shall be used / consumed at the central govt level and state level .Whether raw material arrangement is kept ready in advance to avoid any delay in starting of production , whether product for scheme is prepared apart from raw material manufacturing msme units are having prefect machines to match the out put required and if not whether sources of availability of the machines are readily available. similarly the work force to operate the machine , supply of raw material and ch anal of distribution are cost effective or not .

poultry farms
suresh dheeravath | Wed Apr 6 17:25:23 2016
Sir I have a established poultry farms but i cannot get support from any banks or others.  I want development to my business.

I want to set up Garment Manufacturing unit in Bhiwandi.
Sanjay | Wed Apr 6 15:31:19 2016
I am doing business in overseas since last 15 years, now back in India after Egypt Crises i lot everything. Starting newly to set up a Garment plant in Bhiwandi with small 80 machine setup, need funds and running capital, but don't know were to go for help. Looks like only plans are on paper and for BIG Business people and Influential people.

MSME Scheme: Where do we go.
Gopal S Darbari | Thu Mar 31 14:21:45 2016
The description and reality has been very correctly expressed. This is what is going on for several decades. We need to examine and cooperate with Youths and Banks. Banks have to be proactive and if required be punished for giving such blatant excuses. Nationalized Banks need collateral of more than 110% of overdraft or loan amount. This irony need to be settled on fast track basis for MSME particularly. Banks are carrying on the way they used to do decades back and have not changed despite Govt. new schemes and plans. It is common knowledge leakage, loopholes, corruption and political interference and excuses prevent Govt. schemes to be really implemented. Who gets the loan from Bank are the page 3 people (Vijay Mallaya type) not the deserving young entrepreneurs/innovators. Govt. need to tighten Nationalized Banks, at least to be more sincere in implementing Govt. schemes

CGTSME cover for SSI units
V. Ramdas | Thu Mar 31 12:41:02 2016
While our unit was covered under the scheme voluntarily by our banker ING Vysya bank, the current interest rate is a whopping 17.40% per annum. This apart from the annual charges of 1% on the outstanding credit is a heavy burden on the entrepreneurs.

Geetha Nageswari Akula | Thu Mar 31 05:25:26 2016
Yes Sir, you are 100% correct. What u told, the same thing I faced with so many banks. When we try to get those benefits we faced more and more problems with this Political influence and corruption. Bankers are not supporting us in the same way like you said; for the same causes they are rejecting applications. How can it can be resolved.Not only banking wherever we go the same thing is happening. In our India so many people don't have any property then how can we give collateral to bank to get the schemes of centre like CGTMSE. So many people like Malya are supported bankers. Now what happened. So many finance company's are funding with collateral free then what happened to nationalized banks. If they follow the words given by centre what is the value of our leaders and their words.

Schemes are just on papers
Aiswarya Madhavan | Wed Mar 30 16:57:22 2016
Being an entrepreneur from Kerala I would like to share the difficulties for developing a company. It took much time to obtain licence from the panchayath,licence from electricity board ,certificate from pollution control board etc ..Getting bank loan was much difficult task.I approached different banks both government and private.They didn't took any interest in giving loan even though I have shown the supply orders.The formalities are complicated for getting bank loan.And it is difficult for a company to develop in our country even if there are lot of schemes and funds.

MSME sector
Srivathsan. Mysore | Wed Mar 30 15:50:25 2016
Sir, As I have been stressing that the Present Bankers are not suitable for financing Small scale sector. they are nothing but authorized pawn brokers not interested in nation building activity. There mind set is money lending and recovery like old day moneylenders in most modest manner with all legal backing structured by them only.

PMEGP scheme is not working for many
bubble preet | Wed Mar 30 14:24:22 2016
Banks are creating hurdles in the process of getting loans. Even if you have got subsidy from department, it is of no use unless you can avail the benefit of the scheme due to so called bank policies.

Mockery of CGTMSE scheme
Harshad Banker | Wed Mar 30 08:14:01 2016
We suffered very badly due to high hopes on CGTMSE schemes. We went to Oriental Bank of commerce NIT Faridabad branch but the branch head simply refused to discuss any MSME or collateral free loan. When I showed him the print of the MSME website he simply mocked it saying the politicians keep floating various schemes to get votes & the banks are not bound to follow them. He also added that even if we want loan with collateral we must first start banking with his branch & complete 2-3 years of banking before applying the loan. After making some more inquiries & talking with MSME a couple of times we went to CANARA bank close to this branch the branch manger was little more polite. However the answer was clear no & he asked us to start banking with them first & talk to him after 1-2 years. Our bank statement of HDFC is of no interest to the nationalised banks. During an exhibition at MSME Okhla I raised this issue during a question answer session they simply started talking about funding statistics presented during one of the ministry's presentation during the day & asked us in return "then where are those funds going?" In the process my project got delayed by about 6 months. Finally collateral free funding was done by Electronica Finance. We must thanks them for that as they are doing the job that MSME & the concerned nationalised banks aren't doing. This article asked exactly the same question & I hope the question reaches the concerned and some correction happens.

  Re: Mockery of CGTMSE scheme
Srivathsan, Mysore | Thu Mar 31 01:41:15 2016
The answer to above situation lies in creating a new platform for financing MSME sector with govt funds having people from business and industry. It can be sector based like Mechanical engineering electronics, software, chemical and chemistry, energy area, herbal and pharma area textile,leather and similar specific areas so that these industries can flourish under the umbrella of understanding business people.Let this be funded by Government and CSR funds of big corporate bodies. Let the bank channel be only for carrying out transactions with no liability to bank.

Gopinath | Wed Mar 30 07:54:43 2016
Regarding CGTMSE,what is said above is the fact that the Banks do not show any interest in this scheme,it would be great if there is team to monitor the no of loans disbursed in this scheme by the Banks and there should be a target given to banks from the Ministry for these schemes so that it reaches the needy.

MSME Schemes- where the funds go?
S Chanda | Wed Mar 30 06:43:41 2016
Good point. Both Govts. made a fool of the people by not implement the scheme and drum-beating that they have allocated large amounts towards the same. It all goes into the politicians pocket and few favoured ones. The impediments in ones way make people disgusted to even opt for it. People should avoid these gimmicks. Banks have got the funds but everyone want their pound of flesh and let the big guys go scot free. India will never make it to the top until corruption is removed and one thinks about the nation.

Yes this is true
Joseph George | Wed Mar 30 05:33:34 2016
We have come across this, wherein banks are reluctant to give loan. I have taken this CGTMSE scheme but I had to mortgage my property for this. The banks' view is that , they give to big companies and they don't payback as the government is guarantor for the loan amount.

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