Investment ceiling for MSME sector is outdated, needs enhancement: Rana Kapoor (Watch Full Video)
Updated: Jan 13, 2016 02:14:36pm
New Delhi, Jan 13 (KNN) The capital limits for the MSME sector is outdated and needs enhancement, said Rana Kapoor, MD and CEO, Yes Bank.
Responding to a question from KNN on lending issues faces by the MSMEs and high rate of interests offered by the banks to them, Kapoor said, “Lending to the MSME sector under the Priority Sector should be granulized by making it industry specific and clusterized.”
While the Government is pulling all stops to jumpstart manufacturing in India, the MSME sector, the vast bottom of the manufacturing Pyramid is going through a severe credit squeeze.
Recently released RBI data shows, the Micro, Small and Medium Industries gross Bank credit has reduced by nearly 6% between April and October, 2015. If compared with the figures for same period a year back, the situation is nearly same. Between October 2014 and 2015 credit supply to the MSME industries has increased by only 1.2 %, from R 4768 billion to R 4829 billion, whereas between October 2013 and 2014, the credit growth to the sector was a phenomenal 11.3%.
The situation is more pathetic for the so called Medium sector, the modern MSMEs who have adequate equipment, knowledge pool and other resources to be major player in manufacturing components for Auto, Electronic, Defence, Railways….. almost all facets of ‘Make in India’. Since April 2013, the gross credit to Medium Industries has decreased from R 1239 billion to R 1127 billion in October, 2015, a near 10% drop.
The MSME Ministry has already proposed raising the capital ceiling for manufacturing and service sector units to help them keep pace with the changing business environment.
The proposal suggests doubling the capital ceiling for manufacturing units of micro enterprises from Rs 25 lakh at present to Rs 50 lakh. Similarly, for small enterprises, it proposes to hike the limit from Rs 5 crore to Rs 10 crore.
It has also suggested tripling the limit for medium enterprises from Rs 10 crore to Rs 30 crore.
For services sector units, the proposal entails doubling the investment limit in plant and machinery from Rs 10 lakh to Rs 20 lakh for micro enterprises. For small enterprises belonging to the category, it has suggested raising the limit from Rs 2 crore to Rs 5 crore; whereas for medium enterprises the proposed increase is from the present Rs 5 crore to Rs 15 crore.
Speaking about the capital limits, Kapoor said, “The capital limit for the MSME sector is outdates and needs to be increased to reflect the market levels and definitions of MSMEs.”
Responding to fall in IIP to a four year low, Kapoor said it is significantly due to the base affect from last year.
Watch Full Video
(KNN Bureau)
Responding to a question from KNN on lending issues faces by the MSMEs and high rate of interests offered by the banks to them, Kapoor said, “Lending to the MSME sector under the Priority Sector should be granulized by making it industry specific and clusterized.”
While the Government is pulling all stops to jumpstart manufacturing in India, the MSME sector, the vast bottom of the manufacturing Pyramid is going through a severe credit squeeze.
Recently released RBI data shows, the Micro, Small and Medium Industries gross Bank credit has reduced by nearly 6% between April and October, 2015. If compared with the figures for same period a year back, the situation is nearly same. Between October 2014 and 2015 credit supply to the MSME industries has increased by only 1.2 %, from R 4768 billion to R 4829 billion, whereas between October 2013 and 2014, the credit growth to the sector was a phenomenal 11.3%.
The situation is more pathetic for the so called Medium sector, the modern MSMEs who have adequate equipment, knowledge pool and other resources to be major player in manufacturing components for Auto, Electronic, Defence, Railways….. almost all facets of ‘Make in India’. Since April 2013, the gross credit to Medium Industries has decreased from R 1239 billion to R 1127 billion in October, 2015, a near 10% drop.
The MSME Ministry has already proposed raising the capital ceiling for manufacturing and service sector units to help them keep pace with the changing business environment.
The proposal suggests doubling the capital ceiling for manufacturing units of micro enterprises from Rs 25 lakh at present to Rs 50 lakh. Similarly, for small enterprises, it proposes to hike the limit from Rs 5 crore to Rs 10 crore.
It has also suggested tripling the limit for medium enterprises from Rs 10 crore to Rs 30 crore.
For services sector units, the proposal entails doubling the investment limit in plant and machinery from Rs 10 lakh to Rs 20 lakh for micro enterprises. For small enterprises belonging to the category, it has suggested raising the limit from Rs 2 crore to Rs 5 crore; whereas for medium enterprises the proposed increase is from the present Rs 5 crore to Rs 15 crore.
Speaking about the capital limits, Kapoor said, “The capital limit for the MSME sector is outdates and needs to be increased to reflect the market levels and definitions of MSMEs.”
Responding to fall in IIP to a four year low, Kapoor said it is significantly due to the base affect from last year.
Watch Full Video
(KNN Bureau)
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