New Delhi, May 9, (KNN)  RBI has asked banks to set up micro small enterprises rehabilitation cells (MRC) at all its zonal and circle headquarters for redressing grievances of the sector.

“The banks may evolve a system driven mechanism for monitoring rehabilitation of sick MSE units.  Each bank should constitute a MSE Rehabilitation Cell (MRC) at all its zonal and circle headquarters. The cell should be responsible for monitoring identification of sick units or incipient sickness, conducting viability study, follow-up action, for timely rehabilitation of viable and potentially viable sick MSE units,” said RBI.  

The central bank’s Monetary Policy 2013-14 has called for measures to strengthen monitoring mechanism for loan disposal process so as to step up credit flow to the sector and ensure timely rehabilitation of sick MSE units.

Besides, Indian Banks’ Association led sub-committee which is looking in to the matter of small sick industry revival, suggested measures for redressing the declining credit to the micro and small enterprises through setting up of Management Information Systems (MIS) at regional, zonal and bank levels to ascertain credit flow to MSMEs and establishing a central registration system for online submission of loan applications as also for online tracking of loan applications.

It also asked the banks to develop a software format to facilitate monitoring of the loan disposal system in the bank at all levels, so that banks can see the progress made in flow of credit to the MSME sector at each level.  The format will provide for capturing the details of the applications pending at the end of previous quarter, applications received during the quarter, sanctioned and rejected during the quarter and pending at the end of the quarter. The information has to be displayed by the banks on their website from the quarter ending June 2013.

“There is a need for a structured monitoring mechanism to be put in place in banks at every supervisory level (Branch, Region, Zone, Head Office level etc.) for holistic monitoring of all credit related matters pertaining to the MSE sector and for follow-up of action points on a continuous basis,” it said.

The proposed suggestions if put in place will help banks’ boards which approve loan policy for financing of the MSE sector as also their own monitoring system to review the credit flow to the sector.

RBI also asked the banks to explain to their branch level functionaries of the requirements of the MSE sector and hold training programs to improve awareness of guidelines pertaining to the sector, at branch level. 

Meanwhile RBI Governor D Subbarao met the Chief Minister of Jammu and Kashmir, Omar Abdullah and discussed issues primarily on enhancing credit deposit ratio in the state, the urgent need for legislating SARFAESI Act and other social and economic developments in the state.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets (NPAs) by adopting measures for recovery or reconstruction.  (KNN)