Small Units Seek A Dedicated Bank

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New Delhi, February 17:: The government should pave the way for opening of large fund-based private banks, specifically dedicated to small and medium enterprises (SMEs), to effectively increase the flow of credit to SMEs, the Federation of Indian Micro Small & Medium Enterprises (FISME) has suggested.

In a pre-budget memorandum to finance minister, it said that such banks could be encouraged by incentives in income-tax and liberal conditions in statutory liquidity ratio, cash reserve ratio, non-performing assets classification and capital adequacy ratio.

“The initiative is necessary as the flow of credit to the deserving sector cannot be improved without inducing intense competition in the banking sector,” the president of FISME, Dinesh Singhal told FE.

He said the unorganised and SME sector were strangulated by capital shortage in spite of banks being flush with funds.

Quoting the report of 56th sample survey by National Sample Survey Organisation, Mr Singhal said 50 per cent the respondents approached by NSSO cited capital shortage as the biggest problem.

There are 17 million enterprises in the organised sector alone employing more than 37 million persons.

There has been a steady decline in net banks’ credit to small industries from 15.6 per cent in 1999-2000 to 11.5 per cent during last fiscal.

Contrary to the proposals from ministry of SSI, Reserve Bank of India (RBI) and Planning Commission, the public sector banks had done nothing to fix a separate limit for SSI in the priority sector lending, Mr Singhal said.