The Reserve Bank of India announced a liberal banking regime for the micro and small enterprises (MSEs) by increasing loan limit of an individual borrower up to Rs 5 Cr in the services sector.
Announcing these changes within the broad contours of the priority sector, RBI Governor D Subbarao said here it is proposed to increase the loan limit for MSEs in the services sector, as defined in the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, from Rs two crore to Rs five crore per borrower.
Announcing a modest cut of one-quarter of a percentage point (25 basis points) policy interest rate, the RBI also decided to increase the loan limit from Rs one crore to Rs five crore per borrower for bank loans to dealers/sellers of fertilisers, pesticides, seeds, cattle feed, poultry feed, agricultural implements and other inputs which are classified as indirect finance to agriculture.
It also decided to raise the limit on pledge loans (including against warehouse receipts) from the current limit of Rs 25 lakh to Rs 50 lakh for classification as direct agriculture loans in the case of individual farmers and as indirect agriculture loans in the case of corporates, partnership firms and institutions engaged in agriculture and allied activities.
Subbarao said “guidelines are being issued separately.”
He said in view of the concerns emerging from the deceleration in credit growth to the MSE sector, an Indian Banking Association (IBA)-led Sub-Committee (Chairman: K R Kamath) was set up to suggest a structured mechanism to be put in place by banks to monitor the entire gamut of credit related issues pertaining to the sector. The Committee has since submitted its report based on its recommendations.
It has been decided that banks need to strengthen their existing systems of monitoring credit growth to the sector and put in place a system-driven comprehensive performance management information system (MIS) at every supervisory level (branch, region, zone, head office) which should be critically evaluated on a regular basis.
They should also put in place a system of e-tracking of MSE loan applications and monitor the loan application disposal process in banks, giving branch-wise, region-wise, zone-wise and State-wise positions.
Banks have also been asked to monitor timely rehabilitation of sick MSE units. A format for the purpose will be provided to banks as recommended by the Sub-Committee. The progress in rehabilitation of sick MSE units should be available on the website of banks.
Likewise, the RBI also promised to streamline lendings to the export sector and has asked banks to ensure that different borrowers of personal and retail loans are not given different treatment in terms of interest rates.