MSMEs happy with increase in credit limit, but say cost of lending still too high

New Delhi, Jan 3 (KNN) The Micro, Small and Medium Enterprises (MSME) across the country are feeling a little relieved after Prime Minister Narendra Modi announced to increase credit limit and working capital for them. The sector was facing slowdown due to cash crunch and low demand.

Talking to KNN, Chairman of Federation of Industry & Commerce of North Eastern Region (FINER), RS Joshi said that the increase in limit will go in the betterment of the MSMEs.

“This measure of increasing the working capital limit will go well. MSMEs needs to be in consideration and without any hassle the announcement needs to be implemented at right speed which is good,” said Joshi.

The credit guarantee for micro, small and medium enterprises (MSME) has been increased from rupees one crore to rupees two crores. The Non-Banking Financial Company (NBFC) loans will also be covered under this scheme now. There is also an increase in the Maximum permissible Bank Finance for working capital (MPBF) from 20% at present to 25%.

While Arvind Sinha, President of Textile Association told KNN that the extra money is very much the need of MSMEs right now and the move will play crucial role to help industries buying the raw material.

“It will be good for everybody if you will get extra money in hand. It will definitely become easy to buy raw material and share money,” said Sinha.

Meanwhile, Joshi raised concerns over high lending rates for the MSMEs.

“The cost of finance for MSMEs is very high so that should be considered seriously by the government and RBI. Banks go to big corporate houses and they offer a competitive rate and in case of MSMEs they charge much more,” said RS Joshi. 

Arvind Sinha also made similar demand on behalf of textile sector.

“They should decrease the interest rate, as it is not in favor of MSMEs,” he said.

The associations also shared some valuable points regarding the announcements made by PM.

“Another major announcement that the MSMEs are happy about is increase in credit limit under CGTMSE scheme from rupees one crore to rupees two crores.  So that means without any collateral security bank should lend to MSMEs. We have been demanding this for a long time,” said RS Joshi (FINER). (KNN/RAS)