RBI facilitates easier access to bank loans for MSMEs

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May 4, 2015: Following the recommendations of Prime Minister’s Task Force Report on MSMEs (2010), the RBI has advised the banks to achieve 20 per cent year-on-year growth in credit to micro and small enterprises (MSEs), 10 per cent annual growth in the number of micro enterprise accounts and banks to allocate 60 per cent of the MSE advances to the micro enterprises. In addition, to facilitate easy flow of credit to Micro, Small and Medium Enterprises (MSMEs), the Government launched Credit Guarantee Fund Scheme for Micro and Small Enterprises in August, 2000 under which guarantee cover is provided for collateral free credit extended to micro and small enterprise (MSEs). The Reserve Bank of India (RBI) has also issued guidelines in May, 2010, which mandatorily require banks to dispense with collateral requirement for loans up to Rs.1 million to MSEs. The Ministry also implements Prime Minister’s Employment Generation Programme and Credit Linked Capital Subsidy Scheme, wherein margin money and capital subsidy respectively are disbursed to bring down the effective cost of loan.

The Ministry of Micro, Small and Medium Enterprises, and Small Industries Development Bank of India (SIDBI) have established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). CGTMSE provides guarantee cover under its Credit Guarantee Scheme (CGS) to its registered member Banks / Financial Institutions (called MLIs) against credit facilities up to Rs 10 million sanctioned by them to the eligible Micro and Small Enterprises without taking any collateral security and / or Third Party Guarantee. As on March 31st, 2015 18, 17,245 guarantee proposals have been approved for an amount of Rs 904.45 billion.

This information was given by the Minister of State, Micro, Small and Medium Enterprises, Giriraj Singh in a written reply to a question in Rajya Sabha.

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