RBI proposes improved credit delivery to MSMEs

MSMEs in the services sector may be able to raise more debt according to one of the proposals in the Reserve Bank of India’s Monetary Policy Statement .

The loan limit for MSMEs in the services sector is proposed to be increased from Rs 2 crore to Rs 5 crore. The loan limit is also proposed to be increased per borrower for bank loans to dealers and sellers of fertilizers, pesticides, seeds, cattle feed and poultry feed, agricultural implements and other inputs which are classified as indirect finance to agriculture from Rs 1 crore to Rs 5 crore.

[caption id=“attachment_749079” align=“alignleft” width=“380”]  The loan limit is also proposed to be increased per borrower for bank loans to dealers and sellers of fertilizers, pesticides, seeds, cattle feed and poultry feed. Reuters[/caption]

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The statement also proposes to “raise the limit on pledge loans (including against warehouse receipts) from the current limit of Rs 2.5 million to Rs 5 million for classification as direct agriculture loans in the case of individual farmers and as indirect agriculture loans in the case of corporates, partnership firms and institutions engaged in agriculture and allied activities.”

The RBI has also proposed some measures to improve availability of credit to the micro and small enterprises sector as a whole. “In view of the concerns emerging from the deceleration in credit growth to the MSE sector, an Indian Banking Association led Sub-Committee was set up to suggest a structured mechanism to be put in place by banks to monitor the entire gamut of credit related issues pertaining to the sector,” the statement says.

Based on the committee’s recommendations, the RBI has decided that banks need to “strengthen their existing systems of monitoring credit growth to the sector and put in place a comprehensive performance management information system (MIS) at every supervisory level (branch, region, zone, head office) which should be critically evaluated on a regular basis.”

It further says that banks will need to “put in place a system of e-tracking of MSE loan applications and monitor the loan application disposal process in banks, giving branch-wise, region-wise, zone-wise and State-wise positions.” The position in this regard may be displayed by banks on their websites.

They will also need to monitor timely rehabilitation of sick micro and small enterprise units. The progress in rehabilitation of sick MSE units should be available on the website of banks.