The Hindu Business Line : Banks urged to provide special relief to MSMEs

Kochi, June 4 The Deputy Governor of Reserve Bank of India, Ms Usha Thorat, has suggested that banks adopt favourable lending procedures towards micro, small and medium enterprises (MSMEs) badly hit by the economic slowdown.

In her inaugural address to a one-day conference on ‘Learning from recession, saving an economy: Towards an MSME agenda,’ here on Thursday, she stressed the need to provide special relief to the sector on the lines of the National Equity Fund, recommended by the Chakraborty committee.

The RBI has initiated measures to maintain comfortable liquidity and ensure conducive conditions for flow of credit to productive sectors. Special refinance facility and a special regulatory treatment and extension of time limit for restructuring have been introduced, she said. Special meeting of banks was convened to address MSME issues. Refinance limit to SIDBI for lending to MSMEs has been raised to Rs 7,000 crore while Rs 2,000 crore has been made available from the banks’ contribution to the MSME refinance fund.

Information flow

Information flow to the sector was important and the apex bank had permitted the setting up of separate facilities for credit information. She urged banks to ensure greater transparency and emphasised on convergence of credit and non-credit services and entrepreneurship development.

The country has been affected mainly in three ways — exit of foreign equity, drying up of overseas lines of credit and significant deceleration in global trade growth. This has resulted in a decline in stock markets, a shift by banks and corporates to the domestic credit market, and a slump in demand for exports. The MSMEs faced a build-up of large inventory and delayed payments. Slowdown in remittances from migrant workers also affected the sector.

Mr P.M.Mathew, Director, Institute of Small Enterprises and Development (ISED); Mr Samuel Joseph, General Manager, Exim Bank, Mumbai; Ms Zareena Sheikh, Regional Manager, Export Credit Guarantee Corporation; Mr Kamal Nayan Kabra, Chairman, ISED, Mr B.Yerram Raju, Visiting Fellow, ISED; and Mr Ramakrishnan, President Industrial and Financial Reconstruction Association for Small and Tiny Enterprises, Chennai, were among those who spoke at the meet.

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