Bank lending to MSMEs shrink by 3%; Medium sector suffers 5% drop in credit
Updated: Sep 29, 2015 11:47:33am
New Delhi, Sept 29 (KNN) The repeated complaint by the MSME sector to the Government about stifling credit flow to the sector by the banks has been proven to be correct. The latest RBI data on bank credits to the micro, small and medium enterprises (MSMEs), available up to July 2015, shows that total outstanding credit to the MSME has shrunk by 3 per cent over the outstanding amount in March, 2015.
The biggest drop in credit off take was for the Medium sector, of almost - 5 per cent, while the micro and small enterprises suffered a credit drop of - 2.1 per cent.
It may be interesting to note that during the year 2014, there was an increase, albeit very small, in the total outstanding credit to the MSME sector, during the comparable period – between March, 2014 and July, 2014.
This clearly shows that Banks are apathetic to flow of credit to the ‘vital’ MSME sector.
Meanwhile, the large sector has not faced much credit squeeze. The credit flow to the large sector decreased during March – July 2015 by only 0.9 per cent.
FISME, the leading federation of MSMEs has been repeatedly taking up the issue of apathetic attitudes of the banks towards the MSME sector with the Government.
Recently, it has written to the Banking Secretary urging for additional collateral from the banks to the MSMEs even for the existing credit limits.
“However, Government preferred to maintain a stoic silence,” the industry body said.
Even for the period of one year, between July 2014 and July 2015, the medium sector suffered a gross reduction in credit by -5 per cent, whereas the situation for the small and the large sector was better with an increase in the credit flow by 5 per cent.
The crucial issue here is that while the MSME sector as a whole is the largest employment provider, it is the medium sector which provides the technical cutting edge in all sectors – starting from auto components to electronics. So if this sector continues to suffer a credit squeeze, there arises a big question on success of ‘Make in India’. (KNN/ DB)
The biggest drop in credit off take was for the Medium sector, of almost - 5 per cent, while the micro and small enterprises suffered a credit drop of - 2.1 per cent.
It may be interesting to note that during the year 2014, there was an increase, albeit very small, in the total outstanding credit to the MSME sector, during the comparable period – between March, 2014 and July, 2014.
This clearly shows that Banks are apathetic to flow of credit to the ‘vital’ MSME sector.
Meanwhile, the large sector has not faced much credit squeeze. The credit flow to the large sector decreased during March – July 2015 by only 0.9 per cent.
FISME, the leading federation of MSMEs has been repeatedly taking up the issue of apathetic attitudes of the banks towards the MSME sector with the Government.
Recently, it has written to the Banking Secretary urging for additional collateral from the banks to the MSMEs even for the existing credit limits.
“However, Government preferred to maintain a stoic silence,” the industry body said.
Even for the period of one year, between July 2014 and July 2015, the medium sector suffered a gross reduction in credit by -5 per cent, whereas the situation for the small and the large sector was better with an increase in the credit flow by 5 per cent.
The crucial issue here is that while the MSME sector as a whole is the largest employment provider, it is the medium sector which provides the technical cutting edge in all sectors – starting from auto components to electronics. So if this sector continues to suffer a credit squeeze, there arises a big question on success of ‘Make in India’. (KNN/ DB)
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