In a bid to beat the current economic meltdown, the Centre is expected to create a national fund with a corpus of Rs 1,000 crore for enterprises in unorganised sector.
Talking to FE, Dinesh Rai, secretary of Micro, Small Medium Enterprises (MSME) department, said inter-ministerial group has approved the proposal. Now the proposal has been circulated to all the ministries for comments, said Rai.
The proposal of creating Rs 1,000-crore fund comes in the wake of the National Commission for Enterprises in Unorganised Sector (NCEUS) submitting a report highlighting that maximum of enterprises have been operated in unorganised sector. The NCEUS has appealed to the government to provide some special fund as the bankers do not pay much attention for the enterprises in the unorganised sector, which contributes around 90% of the enterprises.
He said, ?The Rs 1,000-crore corpus can be leveraged. It can become Rs 2,000 crore or Rs 3,000 crore and it will do the refinancing to banks. So this will help the banks to offer more loans.? With this, loans upto Rs 25 lakh could be offered that inturn would stimulate the unorganised sector.
In fact the MSME sector, which is second largest employer after agriculture in the country, provides employment to over 42 million people and contributes to about 45% of the total manufactured output and nearly 40% to India?s exports.
The MSME sector already comes under priority sector, which entitled for 40% loans offered by the banks. However, he said the department is in the process of convincing the finance ministry and Reserve Bank of India to earmark 15% of overall priority sector lending. Currently the sector has been provided with around 12% of priority sector lending. An addition of 3% would come around around Rs 50,000 crore, he added. He also said the government is likely to introduce Limited Liability Act to reduce liability of partners of the company that avail loan.
Already the government has announced some measures to facilitate the growth of MSME sector like cenvat cut of 4% on all products for the reminder of the financial year, 2% interest rate subvention up to March 31, 2009 in pre and post-shipment credit for small and medium enterprises. Further loan limit under credit guarantee scheme has been extended from Rs 50 lakh to Rs 1 crore and the guarantee cover for loans up to Rs 5 lakh has been increased from 80% to 85%. lock-in period for loans covered under the credit guarantee scheme reduced from 24 months to 18 monhts while the government has issued an advisory to central public sector enterprises to ensure prompt payment of bills of MSMEs.
