PMO wants RBI to boost bank credit to MSMEs

02 Aug 2011

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A task force under the Prime Minister's Office (PMO) has asked the Reserve Bank of India (RBI) to put pressure on banks to increase lending to the micro, small and medium enterprises (MSME) sector, in a bid to push manufacturing growth and employment in the country.

The task force, headed by TKA Nair, adviser to the prime minister, expressed concern over the apathy of state-run banks, including SBI, in meeting the MSME credit disbursement targets.

Scheduled commercial banks in the country, including the State Bank of India (SBI), the country's largest lender, have failed to meet the targeted 20 per cent share of total credit to small and medium enterprises (MSMEs). Of this, 50 per cent is earmarked for the micro units, the task force pointed out.

It is, however, no known how the MSME sector will borrow at the increased lending rates after the RBI itself continues to push up interest rates in the country.

Banks could hardly achieve a 32 per cent increase in lending to MSMEs against the target of 50 per cent growth set by the RBI, according to the PMO.

MSME secretary Uday Kumar Verma, plan panel member Arun Maira and senior officials of the departments of expenditure and financial services as also a senoor official of the RBI attended the meeting.

Besides SBI and its associates such as the State Bank of Patiala and State Bank of Travancore, other public sector banks such as IDBI Bank, Union Bank of India, Vijaya Bank, Allahabad Bank and Central Bank of India have also fallen short of their MSME credit disbursement targets.

The MSME sector comprising around 26 million units provides employment to 60 million people and contributes 40 per cent of India's exports and 45 per cent of its total manufacturing output.

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