The Reserve Bank of India (RBI) has issued detailed guidelines to all scheduled commercial banks on lending to micro, small and medium enterprises (MSME) sector which, inter alia, provide for a time frame for disposal of loan applications, loan limit for dispensing the collateral requirement and sub-targets for micro enterprises within the MSE lending. This was officially shared by Mr Giriraj Singh, the Minister of State, Micro, Small and Medium Enterprises, Government of India in the Rajya Sabha.
Following the recommendations of the Prime Minister’s Task Force on MSMEs (2010), the RBI has advised the banks, to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises, to allocate 60% of the MSE advances to the micro enterprises and to ensure 10% annual growth in number of micro enterprise accounts.
As per the results of Fourth All India Census of Micro, Small & Medium Enterprises (MSME) and Economic Census 2005 available in Annual Report 2013-14, the number of working enterprises in MSME sector was 361.76 lakh in the year 2006-07. As per the All India Census, The number of MSMEs in Jharkhand and Gujarat ware 6.75 lakh and 21.78 lakh respectively in the year 2006-07.
To facilitate easy flow of credit to Micro, Small and Medium Enterprises (MSMEs), the Government launched Credit Guarantee Fund Scheme for Micro and Small Enterprises in August, 2000 under which guarantee cover is provided for collateral free credit extended to micro and small enterprise (MSEs). The Reserve Bank of India (RBI) has issued guidelines in May, 2010, which mandatorily require banks to dispense without collateral requirement for loans upto Rs.10.00 lakh to MSEs. The Ministry also implements Prime Minister’s Employment Generation Programme and Credit Linked Capital Subsidy Scheme, wherein margin money and capital subsidy respectively bring down the effective cost of loan. The Government is also promoting investment in MSME sector through Schemes in the area of marketing, infrastructure, technology, skill development and competiveness namely, Marketing Development Programme, Cluster Development Programme, Entrepreneurship Development Programme and National Manufacturing Competiveness Programme etc.