While India Fast tracks 'Make in India', MSME sector suffers credit squeeze
Updated: Dec 30, 2015 02:30:31pm
The reasons are not very difficult to find. Under criticism for huge bad loans to the corporate sector, Banks have adopted the easy way of restricting credit flow to MSMEs by asking for additional collaterals for same credit limits, taking refuge of lower credit ratings etc. Taking plea of adopting Basel norms for risk classification of Bank assets, MSME entrepreneurs are being cajoled to bring in more personal collaterals failing which the sanctioned credit limit is threatened to be reduced.
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 Rs 1239 billion to Rs 1127 billion in October, 2015, a near 10% drop.
Globally, level of credit offtake is considered to be a good measure for ascertaining health of Industries as it shows growth in business which necessitates additional fund for operations. So stagnancy in manufacturing as shown by recent IIP data has synced with the stagnancy in credit flow. Which is the cause and which is the effect, may be issue of a larger debate?
FISME the leading Federation of India MSMEs has recently taken up the credit related pain points of the MSME sector with the RBI and a high level delegation from FISME held a meeting with A K Paliwal, Executive Director of RBI, where immediate action by the central Bank to create an facilitating eco system for the MSME sector was stressed. (KNN/ DB)