Govt wants 10% of banks’ priority sector credit to SMEs

Govt wants 10% of banks’ priority sector credit to SMEs


Mumbai: Government today said it plans to increase credit flow to micro-enterprises in the country by making 10% of the total priority sector lending of banks mandatory to such firms.

The Government and the Reserve Bank are discussing the matter on a constant basis and they are likely to come out with a decision in the near future, Ministry of Micro, Small and Medium Enterprises Secretary Dinesh Rai told reporters here.

“We are hopeful that of the total priority sector lending, a minimum of 10% can be reserved for small firms. We are discussing this matter with the related authorities," Rai said.

At present, banks are required to lend at least 40% farm loans and home loan below 30 lakh in the country.

However, there is no specified credit limit to the small scale industries as of now.

At present, nearly 42 million small and medium sized companies operate in the country, contributing nearly 40% to total exports and 45% to the manufacturing output in India, Rai said.

In a bid to enhance credit flow to the SME sector, government had launched Prime Minister’s Employment Generation Programme (PMEGP) to generate nearly 37 lakh new jobs in the country in the SME sector.

Under PMEGP, government has earmarked around Rs5,000 crore for the benefit of SMEs and SSIs, Rai said.

Also, the ministry is in discussions with the banking regulator to enhance the number of days, which banks take into account before declaring a defaulted case as non-performing asset from the current 90 days to 180 days, Rai said.