Analysis

RBI & Govt Are Working to Ensure Access of Credit to MSMEs: Nirmala Sitharaman

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Reserve Bank of India (RBI) and the Government have taken several steps to ensure access of credit to Micro, Small and Medium Enterprises (MSMEs), said Nirmala Sitharaman, Union Minister of Finance & Corporate Affairs in a written reply to Rajya Sabha.

She stated “The Government of India has received complaints/representations from time to time from MSMEs regarding constraints in accessing credit from institutional sources.

This inter-alia, indicate, insistence on collateral, delayed sanctioning of credit, the sanction of lower loan amount as against the required amount and charging of higher rate of interest etc.”

Over this matter, she replied Reserve Bank of India (RBI) and the Government have taken several steps to ensure access of credit to MSMEs, which inter-alia include, advice to all Scheduled Commercial Banks (SCBs) to achieve a 20% year-on-year growth in credit to Micro and Small Enterprises (MSEs), allocation of 60% of the MSEs advances to the Micro Enterprise Accounts.

Nirmala added that, “The MSMEs were advised to adopt one cluster, operationalize at least one specialized MSME branch in every district, simply computation of Working Capital of MSE units to make it minimum 20% of the Projected Annual Turnover of the unit of borrowable units up to Rs 5 crores, set-up Trade Receivables Discounting System (TReDS).”

“RBI has deregulated the interest rate on advances and these interest rates are determined by banks with the approval of their respective Board of Directors subject to extant guidelines.  Loans to MSMEs are provided as per the interest rate structure of the bank. The interest rate is finalized based on various factors which inter-alia include, cost of funds to the institution, credit rating of the unit, tenure of loan, purpose of loan etc,” she added towards the end of her written reply.

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