Speaking at the Golden Jubilee celebrations of the Andhra Pradesh State Financial Corporation (APSFC) here, the FM said that institutional lending to SMEs is just 5% of the GDP as against over 50% in the US and Europe and other developed countries.
The government has targeted to take the loan ratio to SMEs to 25% from the existing 5% in the next five years, Mr Chidambaram said.
Reasoning for hampering economic growth due to lower credit flow to SME sector, Mr Chidambaram said that he will convene a meeting of CMDs of PSU banks in the next two days to discuss ways to enhance the credit flow to small sector.
Coming down heavily on the poor performance and ill health of the state financial corporations (SFCs), finance minister P Chidambaram said that over the years the SFCs have neglected fundamental financial prudence.
Elaborating the Central role in improving the health of SME sector, Mr Chidambaram said that the government has established credit guarantee fund with a corpus of Rs 930 crore and for sunrise industries like IT, BT etc with a corpus of Rs 500 crore and national equity fund jointly with SIDBI.
Earlier, speaking on the occasion, the Andhra Pradesh chief minister YS Rajasekhara Reddy said that since SFCs have been created by an Act of Parliament, the Centre must have a role in reviving them.
The CM requested the finance minister to consider providing matching equity of Rs 50 crore to APSFC as against the states share, to which Mr Chidambaram responded that he would take note of the CMs request.