Enhanced credit flow to SMEs, change in tax norms sought

Written by fe Bureaus | New Delhi | Updated: Oct 29 2009, 06:00am hrs
The government and the industry on Wednesday agreed on the need to provide more and more credit to 2.6 crore small and medium enterprises (SMEs) in the country. The participants at FEs Round Table Conference on The Indian Growth Story and the SMEs on Wednesday reached a consensus on critical issues such as skill development, technology upgrade, market access and environmental awareness.

Industry representatives said in the absence of bank credit, SMEs should be given options to raise funds through other sources like stock exchanges and private equity. They also asked the Centre and state governments to realign taxation norms and expedite the process of duties refund.

We have realised that banks are reluctant to give loans to SMEs as showed by the recent statement of Reserve Bank of India deputy governor (KC Chakrabarty) that banks would not say no to viable projects. A lot is still required to be done to increase the flow of credit to the sector, micro, small and medium enterprises ministry secretary Dinesh Rai said at the conference.

However, bankers said the gap in funding was largely because the borrowers are too small and are in the unorganised sector. As they are in the unregistered sector, the units dont have proper books and nobody has a clear idea about their projects, State Bank of Indias general manager (SME-trade and services) TS Krishnaswamy said. According to Reserve Bank of Indias data, credit to small enterprises grew 34% in the year ended May 22, 2009 against 72% a year ago.

Milagrow CEO and founder director Rajeev Karwal said the industry was lacking in marketing activities and upgrading technological capabilities. Around 80-85% of them are not aware of the various schemes run by the government, he added.