in 74199 villages across the various states in the country. this comprises of 2493 branches, 69374 business correspondents and 2332 other modes like rural atms, mobile vans, etc. the process for ensuring coverage of villages with population below 2000 is underway. bis central bankers ’ speeches to ensure enhanced credit flow to the sector, in terms of the recommendations of the prime minister ’ s task force on msmes constituted by the government of india, banks were advised to achieve a 20 per cent year - on - year growth in credit to micro and small enterprises ; with allocation of 60 % of the mse advances to micro enterprises, which is to be achieved in stages viz. 50 % in the year 2010 – 11, 55 % in the year 2011 – 12 and 60 % in the year 2012 – 13 and achieve a 10 % annual growth in number of micro enterprise accounts. the reserve bank is closely monitoring the achievement of targets by banks on a quarterly basis. the matter is followed up with the laggard banks to know their constraints and impress upon them the need to devise strategies to gear up the credit mechanism for the sector. as the mse borrowers, especially new generation entrepreneurs, do not have collaterals to offer to avail of bank finance, we have, in terms of the recommendations of the working group constituted by the reserve bank of india to review the credit guarantee scheme ( cgs ) of the credit guarantee fund trust for micro and small enterprises ( cgtmse ), mandated banks, on may 6, 2010, to provide collateral free loans to the mse sector up to rs. 10 lakh, which was increased from rs. 5 lakh earlier and the banks, in turn, could take cover for the collateral free credit facilities under cgs. all scheduled commercial banks have also been advised on may 4, 2009, to review and put in place an mse loan policy, restructuring / rehabilitation policy and non - discretionary one time settlement scheme for recovery of non - performing loans, duly approved by their board of directors. banks were advised in december 2009 to give wide publicity to the non - discretionary one time settlement scheme for recovery of non - performing loans for the mse sector by placing it on their website and through other possible modes of dissemination. to address the complaints received from various industry associations / chambers that banks are not acknowledging their loan applications, we have, on january 4, 2012, mandated banks to acknowledge all loan applications, submitted manually or

doing enough for the msmes and are catering more to the needs of the large corporates. b. problem faced by banks in lending to msmes commercial banks are reluctant to service msmes for a number of reasons, though at times, not based on facts. msmes are regarded by creditors as high - risk borrowers because of insufficient assets and low capitalization, vulnerability to market fluctuations and high mortality rates. information asymmetry arising from smes ’ lack of accounting records, inadequate financial statements or business plans also makes it difficult for creditors to assess the creditworthiness of potential sme proposals. besides, high administrative / transaction costs of lending to small amounts may not make sme financing a profitable business. to encourage commercial banks to lend to smes, the government and reserve bank of india have an important role to play by setting out a policy framework for channeling adequate funds to the sme sector. smes, on their part, need to be more transparent while representing their businesses and future plans before bankers so that they gain the trust and confidence of creditors to extend finance to them. c. steps taken by government of india / reserve bank of india recognizing the important role played by msmes in economic development and its sizeable contribution to employment and gdp, and realizing that financial access is critical for msme growth and development, government and reserve bank of india are taking the lead in supporting initiatives that improve access to finance. in view of the high level of financial exclusion in this sector ( 93 % ), the drive to universal financial access, including sme finance, is no longer a policy choice, but a compulsion. the reserve bank of india has intensified a number of measures and endorsed quantitative access targets over the last few years to further financial inclusion. let me very briefly touch upon a few of them. with an objective of ensuring uniform progress in provision of banking services in all parts of the country, banks were advised to draw up a roadmap to provide banking services through a banking outlet in every unbanked village having a population of over 2, 000 by march 2012. the reserve bank advised banks that such banking services need not necessarily be extended through a brick and mortar branch but could be provided also through any of the various forms of information and communication technology ( ict ) – based models, including business correspondents ( bcs ). as at the end of march 2012, as reported by the state level bankers ’ committees of various states / union territories, banking outlets have been opened