Banks are expected to demand the setting up of a special window for lending to small and medium enterprises (SMEs), on the lines of the refinance facility opened by the Reserve Bank of India for distressed mutual funds and non-banking finance companies.

The move comes after representatives of small and medium enterprises met TS Narayanasami, chairman of the Indian Banks Association (IBA) and sought changes in the norms related to non-performing assets (NPAs).

Banks want the special RBI window to help them tide over the problem of rising defaults in the small scale sector. The IBA, which met representatives of the SMEs,  will discuss the issue with the RBI.

Representatives of the banks are expected to meet RBI governor D Subbarao on 28 November to discuss the issue. The meeting will be attended by CEOs of some of the large private and state-owned banks.

RBI has convened the meeting to specially to discuss issues related to ''support to small and medium enterprises (SME), support to exporters and the liquidity position in the system.''

The RBI governor had, last week, discussed the liquidity situation with chairmen of some state-owned banks and had made inquiries about the problems faced by SMEs and exporters.

While the liquidity situation has eased, bankers say, credit offtake has not increased to the same extent.

Although, there is a possibility of RBI further easing interest rates, bankers expect the central bank to wait for some more time for another rate cut.

CNBC TV18, meanwhile, reported that SMEs today presented bankers a list of demands to get the growth engine of the economy back on track. Over a dozen representatives of SMEs met the Indian Bank Association (IBA) today to share their concerns about availability of credit.
The report said as many as 20 representatives associations of the SMEs met the IBA to share with them the concerns about the cost and availability of credit. The list of demands included among others:

• No penal charge on delayed payment;
• Second restructuring of loans; and
• Extending NPA periods from 90 to 180 days.

There are concerns about working capital loan availability. IBA Chairman TS Narayanasami said banks could look at stopping penal charges. The proposals will be presented to Reserve Bank of India as well. IBA claims that this exercise is a logical step at developing a stimulus package for SMEs.