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Banks have requested the Reserve Bank of India to expand the scope of the definition of ‘micro enterprises' as fulfilling the lending target prescribed by the regulator for this segment is proving to be a tall order.
Bankers say that there are not enough micro enterprises in the country with the requisite borrowing appetite for them to fulfil the lending targets prescribed by the RBI.
On the recommendations of a high level task force on MSME (micro, small and medium enterprises), the RBI last year mandated that all scheduled commercial banks should achieve a 20 per cent year-on-year growth in credit to micro and small enterprises (MSE) to ensure enhanced credit flow.
Further, banks should lend 60 per cent of their MSE lending to micro enterprises in stages — 50 per cent in 2010-11, 55 per cent in 2011-12 and 60 per cent in 2012-13. They also have to achieve a 10 per cent annual growth in the number of micro enterprise accounts.
Targets, achievement
As per data shared with the Finance Ministry, while public sector banks (PSBs) surpassed the target of 20 per cent annual growth in credit to the MSE sector by achieving 36.3 per cent growth in 2010-11, their achievement was not up to the mark in the case of two other parameters.
Against the target of 50 per cent of MSE lending going to micro enterprises in 2010-11, PSBs could only achieve 42.56 per cent and against the target of 10 per cent increase in number of micro enterprise accounts, there was a negative growth of 3.27 per cent.
As achieving the prescribed targets is proving to be an uphill task, banks want micro enterprises to be redefined as those entities with investment in plant and machinery up to Rs 1 crore (against Rs 25 lakh now) in the case of manufacturing units.
In the case of micro enterprises in the service sector, banks want the definition to be re-jigged to those entities with investment in equipment to Rs 40 lakh (against Rs 10 lakh now).
Micro-enterprises include small business, small retail trade, small road and water transport operators, professional and self-employed persons.
Besides the difficulty in finding micro-enterprises with the requisite credit absorptive capacity, bankers attribute non-achievement of credit target to this segment to some micro-enterprise accounts getting upgraded to medium enterprises and, hence, the decrease in the number of accounts.
Further, recovery and write-offs are also another reason.
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