Lok Sabha Question No. 3724 (UNSTARRED), answered on 2023-03-23
Subject: Credit Gap for MSME Sector
Ministry: MICRO,SMALL AND MEDIUM ENTERPRISES
Asked by: Venkatesh Netha Borlakunta, Gaddam Ranjith Reddy, Kavitha Malothu

## GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES

## LOK SABHA UNSTARRED QUESTION NO. 3724 TO BE ANSWERED ON 23.03.2023

## CREDIT GAP FOR MSME SECTOR

3724.

SHRI VENKATESH NETHA BORLAKUNTA:

DR. G. RANJITH REDDY:

SHRIMATI KAVITHA MALOTHU:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

- (a) whether it is true that no assessment was made since 2018 about the credit gap for MSME sector and if so, the reasons therefor;
- (b) whether  Covid  pandemic  has  shattered  this  sector  and  there  is  a  huge  credit  demand  for MSME sector;
- (c) if so, the steps taken by the Government to reduce/close credit gap for MSME sector; and
- (d) whether without having any details of credit gap, the Government is able to provide credit requirements to MSME sector and if so, the details thereof?

## ANSWER

## MINISTER OF STATE FOR MICRO, SMALL AND MEDIUM ENTERPRISES (SHRI BHANU PRATAP SINGH VERMA)

- (a): The  Expert  Committee  on  Micro,  Small  and  Medium  Enterprises,  constituted  by  Reserve Bank of India in December, 2018, estimated the overall credit gap in the MSME sector to be in the range of Rs. 20 to 25 lakh crore.
- (b) to (d): The Government has taken various measures for easing access to credit for MSMEs. As reported by Reserve Bank of India (RBI) some of the measures taken by RBI for improving flow of credit to MSME sector are as under:
- i. Priority  Sector  Lending  Guidelines:  In  terms  of  Master  Direction  on  'Priority  Sector Lending  (PSL)  -  Targets  and  Classification'  dated  September  4,  2020,  all  bank  loans  to MSMEs  conforming  to  the  conditions  prescribed  therein  qualify  for  classification  under priority sector lending.
- ii. Collateral  requirements  of  MSME  units:  Scheduled  Commercial  Banks  have  been mandated not to accept collateral security in the case of loans up to ₹10 lakh extended to units in the MSE sector.
- iii. Trade  Receivables  Discounting  System  (TReDS):  In  order  to  address  the  problem  of delayed  payments  to  MSMEs,  RBI  has  issued  guidelines  for  setting  up  and  operating  the Trade  Receivables  Discounting  System  (TReDS).    The  scheme  facilitates  the  financing  of trade  receivables  of  MSMEs  from  corporate  and  other  buyers,  including  government departments and public sector undertakings (PSUs) through multiple financiers electronically.

- iv. Several special frameworks have been introduced since 2019 to enable banks to restructure their MSME  exposures, subject to certain conditions, to address the stress in the sector due to various factors. A special restructuring window was opened for MSMEs  on January 01, 2019, which was extended vide notification dated February 11, 2020 and subsequently subsumed under the COVID Resolution Frameworks  for  MSMEs  announced  on  August  06, 2020 and May  05, 2021.

## In addition to the above, following measures have also been taken to provide credit to MSMEs.

- (i) Rs.  5  lakh  crore  Emergency  Credit  Line  Guarantee  Scheme  (ECLGS),  for  businesses including MSMEs.
- (ii) Credit  Guarantee  Scheme  (CGS):  Ministry  of  MSME  has  been  operating  Credit Guarantee Scheme for Micro & Small Enterprises through Credit Guarantee Fund Trust for  Micro  &  Small  Enterprises  (CGTMSE)  since  July,  2000.  Under  this  scheme  upto 85% guarantee is extended upto a credit facility of Rs. 200 lakh, for both term loan and working capital. Budget 2023-24 announced the infusion of Rs.9,000 crore in the corpus of CGTMSE  to enable an additional credit of Rs. 2 lakh crore with reduced cost of the credit.
- (iii) Rs. 50,000 crore equity infusion through Self Reliant India Fund.
- (iv) New revised criteria for classification of MSMEs.
- (v) No global tenders for procurement up to Rs. 200 crore.
- (vi) 'Udyam Registration' for MSMEs, for Ease of Doing Business w.e.f. 1.7.2020.
- (vii)   Launching of an online Portal 'Champions' in June, 2020 to cover many aspects of egovernance including grievance redress and handholding of MSMEs.
- (viii) Inclusion of Retail and Wholesale traders as MSMEs w.e.f. 2.7. 2021 for priority sector lending.
- (ix)  Non-tax benefits extended for 3 years in case of an upward change in status of MSMEs.
- (x)        Launch  of  Udyam  Assist  Platform  on  11.1.2023  to  bring  Informal  Micro  Enterprises under the formal ambit for availing the benefits under Priority Sector Lending.

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