Lok Sabha Question No. 3445 (UNSTARRED), answered on 2017-08-04
Subject: Credit to MSMEs
Ministry: FINANCE
Asked by: SHYAMA CHARAN GUPTA, Tejpratap Singh,Yadav, RABINDRA KUMAR JENA, PREM DAS RAI, GAJENDRA SINGH SHEKHAWAT

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UN-STARRED QUESTION NO 3445 TO BE ANSWERED ON 4th AUGUST, 2017 / SHRAVANA 13, 1939 (SAKA)

'Credit to MSMEs'

3445 : SHRI SHYAMA CHARAN GUPTA:

SHRI TEJ PRATAP SINGH YADAV:

SHRI RABINDRA KUMAR JENA:

SHRI PREM DAS RAI:

SHRI GAJENDRA SINGH SHEKHAWAT:

Will the Minister of FINANCE be pleased to state

- a) whether the Micro, Small and Medium Enterprises (MSMEs) have been facing constraints in accessing credit facilities from institutional sources;
- b) if so, the details thereof along with the credit disbursed to MSMEs the last three years; during
3. C)
4. whether the banks are charging higher interest rates to MSMEs, if so, the details thereof and the reasons therefor;
- d) whether the Government has noticed that certain banks are not transmitting the interest rate cuts to the MSME sector, if so, the details thereof and the action taken such banks; against
6. e)
7. whether there is urgent need to provide incentives to private equitylventure capital investors to encourage capital infusion in the MSME sector; and
8. if so, the details thereof along with the steps being taken by the Government
9. to ensure easy and adequate availability of credit for sustainable growth of the MSME sector?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SANTOSH KUMAR GANGWAR)

- (a) & (b) Government have received complaints/representations from time to time from Micro, Small and Medium Enterprises (MSMEs) regarding constraints in accessing credit from institutional sources. These inter-alia, indicate insistence on collateral, delayed sanctioning of credit, sanction of lower loan amount as against the required amount; charging of higher rate of interest; etc:

Details of outstanding credit to MSMEs during the last three years are given at Annex:

- (c) & (d) Reserve Bank of India(RBI) has deregulated the interest rate on advances and these interest rates are determined by banks approval of their respective Board of Directors subject to extant guidelines Loans to MSMEs are provided as per the interest rate structure of the bank: alia include, cost of funds to the institution, credit of the unit, tenure rating
- The interest rate is finalized based on various factors which interof loan, purpose of loan etc:
- (e) To encourage  capital infusion in the MSME sector, Small Industries Development Bank of India (SIDBI) operates the India Aspiration Fund (IAF) forcontribution to the corpus of MSME focused Venture Capital Funds (VCFs)Alternative Investment Funds (AIFs) Under the Start up India Action Plan; Government have also operationalized a Fund of Funds for Start Ups (FFS) to contribute to Start Up focused AIFs. Both the initiatives enable VCFsIAIFs Managers to raise resources for investment from other investors.
- Government has taken several steps to extend easy loans to MSMEs, which inter-alia include advise to all Scheduled Commercial Banks (SCBs) to achieve a 20% year-on-year growth in credit to Micro and Small Enterprises (MSEs) to ensure enhanced credit flow; allocation of 60% of MSE advances to Micro Enterprises accounts; a 10% annual growth in number of micro enterprise accounts; adoption of one cluster; operationalizing at least one specialized MSME Branch in every district etc. In addition; a target of 7.5% of Adjusted Net Bank Credit (ANBC) has been prescribed for Micro Enterprises; SCBs have been mandated not to accept collateral security in the case of loans up to Rs.10 lakh extended to units in the MSE sector and computation of working capital requirements of MSE units has been simplified:

Source

RBI

## Qutstanding credit to\_Micro\_Smalland Medium Enterprises

(Number of accounts in lakh)

(Amount Rs. in crore)

| Year              | Public Sector Banks   | Public Sector Banks   | Private Banks   | Private Banks   | Foreign Banks   | Foreign Banks   | Scheduled Commercial Banks   | Scheduled Commercial Banks   |
|-------------------|-----------------------|-----------------------|-----------------|-----------------|-----------------|-----------------|------------------------------|------------------------------|
| Year              | No.of Alcs            | Amt: Ols              | No.of Alcs      | Amt: Ols        | No.of Alcs      | Amt: Ols        | No. of Alcs                  | Amt: Ols                     |
| 31.3.2015         | 86.08                 | 852689.27             | 50.23           | 281548.83       | 2.84            | 36787.95        | 139.15                       | 1171026.05                   |
| 31.3.2016         | 106.82                | 820548.01             | 96.42           | 359085.34       | 1.86            | 36373.76        | 205.10                       | 1216007.11                   |
| 31.3.2017 (prov ) | 113.09                | 828190.83             | 118.50          | 430889.61       | 2.07            | 36500.82        | 233.65                       | 1295581.26                   |