MUDRA-SIDBI will just limit to work like a window for SIDBI: Economist
Updated: Jan 08, 2016 01:07:47pm
New Delhi, Jan 8 (KNN) The government’s decision to convert MUDRA Ltd into MUDRA Small Industries Development Bank of India (SIDBI) as a wholly owned subsidy of SIDBI, shows that the government has “no will” to have a dedicated bank for the MSME sector and invest more money into any exclusive dedicated bank for the informal sector, opined Ravi Srivastava from Jawaharlal Nehru University (JNU).
SIDBI for more than two decades now has been lending to the micro, small, and medium-scale enterprises in India. There are also the mandatory priority sector lending required of commercial banks.
“These institutions itself have not been particularly successful mainly because of lack of awareness of their schemes, limited outreach and high rate of interest,” he told KNN adding that the MUDRA-SIDBI Bank will also just limit to work like a “window” for the SIDBI which will be of no help to solve the current issues of the credit hit MSME sector.
The issue of adequate, timely and affordable credit to the MSME sector has been drawing the attention of policy-makers since long. There still remains a wide credit gap for the sector.
The Union Cabinet on Wednesday approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans and for converting MUDRA Ltd. into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI.
Now the MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management and also data analysis etc. The MUDRA (SIDBI) Bank can take -up any other role as may be assigned to it by Government.
“The government should have had a dedicated bank for the MSME sector with cheaper rate of interests,” Srivastava said.
“Currently the rate of interest at which the banks lend to the small and medium enterprises is much much higher than that of the large enterprises. So, there is a need to work on this and make credit available at cheaper rates,” he said.
Srivastava, who was a part of the Arjun Sengupta Commission, said that the commission had recommended reducing the rate of interest for the informal sector, but nothing was done on this.
He said, there is rather a need to work on the outreach of the schemes and loans to the unorganized sector which is scattered and there is no data of it.
The eminent economist noted that during the UPA regime, the unused amounts of the banks under the priority sector lending which was transferred to SIDBI to further give loans to the MSME sector, was not utilized fully. “Around Rs 500-600 crore were unused during the UPA regime,” he said.
Hence, the MUDRA-SIDBI bank will also have “no benefit” for the MSME sector until and unless the government works on the outreach and rate of interest for the loan disbursal, he said.
Srivastava said that the government is not willing to put more money into MUDRA bank.
Unused priority sector lending (PSL) funds of commercial banks has been used to set up Mudra’s Rs 20,000 crore corpus. These funds will come at 6% interest, which will enable Mudra to refinance at a much cheaper rate to banks and NBFCs for on-lending. (KNN Bureau)
SIDBI for more than two decades now has been lending to the micro, small, and medium-scale enterprises in India. There are also the mandatory priority sector lending required of commercial banks.
“These institutions itself have not been particularly successful mainly because of lack of awareness of their schemes, limited outreach and high rate of interest,” he told KNN adding that the MUDRA-SIDBI Bank will also just limit to work like a “window” for the SIDBI which will be of no help to solve the current issues of the credit hit MSME sector.
The issue of adequate, timely and affordable credit to the MSME sector has been drawing the attention of policy-makers since long. There still remains a wide credit gap for the sector.
The Union Cabinet on Wednesday approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans and for converting MUDRA Ltd. into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI.
Now the MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management and also data analysis etc. The MUDRA (SIDBI) Bank can take -up any other role as may be assigned to it by Government.
“The government should have had a dedicated bank for the MSME sector with cheaper rate of interests,” Srivastava said.
“Currently the rate of interest at which the banks lend to the small and medium enterprises is much much higher than that of the large enterprises. So, there is a need to work on this and make credit available at cheaper rates,” he said.
Srivastava, who was a part of the Arjun Sengupta Commission, said that the commission had recommended reducing the rate of interest for the informal sector, but nothing was done on this.
He said, there is rather a need to work on the outreach of the schemes and loans to the unorganized sector which is scattered and there is no data of it.
The eminent economist noted that during the UPA regime, the unused amounts of the banks under the priority sector lending which was transferred to SIDBI to further give loans to the MSME sector, was not utilized fully. “Around Rs 500-600 crore were unused during the UPA regime,” he said.
Hence, the MUDRA-SIDBI bank will also have “no benefit” for the MSME sector until and unless the government works on the outreach and rate of interest for the loan disbursal, he said.
Srivastava said that the government is not willing to put more money into MUDRA bank.
Unused priority sector lending (PSL) funds of commercial banks has been used to set up Mudra’s Rs 20,000 crore corpus. These funds will come at 6% interest, which will enable Mudra to refinance at a much cheaper rate to banks and NBFCs for on-lending. (KNN Bureau)
Loading...
