Facing enormous credit crunch due to global economic slowdown and reluctance by the banks to lend, the second stimulus package announced by the government on Friday failed largely to lift up the spirit of small and medium enterprises (SMEs).
Although SMEs? representatives state slashing repo and reverse repo rates would certainly make banks ?more willing to lend?, the measures like setting up state-level bankers committees would hardly make any impact.
Terming that the steps as ?of marginal consequence?, the Federation of Indian Micro and Small & Medium Enterprises (FISMEs) said the sector, which employs more than 31 million people needs much more than these half-backed measures. As a part of series of measures to boost economy the government announced measures like holding special monthly meetings of State Level Bankers? Committees for resolution of conflict relating to credit issues for the SMEs. The proposal also include setting up a cell jointly by the respective department of Micro, Small and Medium Enterprises and Department of Financial Services at the state levels.
?While most of the banks unwilling to lend to SMEs, setting up committees at the state levels would hardly of any support to 10 million SMEs requirement for immediate credit facility,? Anil Bhardwaj, Secretary General, FISME told FE.
In its first stimulus package announced four weeks back, the government had announced increasing the guarantee cover under the Credit Guarantee Scheme for SMEs on loans from Rs 50 lakh to Rs 1 crore with a guarantee cover of 50%.
However with very cold response from for SMEs sector, the government on Friday decided to increase the guarantee cover extended by Credit Guarantee Fund Trust (CGFT) to 85% for credit facility upto Rs.5 lakh.
CGFT was set up by ministry of micro, small and medium enterprises and SIDBI back in 2000 to ensure that lenders give importance to project viability and secure the credit facility purely on the primary security of the assets financed.
The measure would benefit about 84% of the total number of accounts accorded guarantee cover, the government said in its announcement. ?Given the kind of credit crunch being faced by SMEs due to global slowdown and banks reluctance to lend, the enhancing the credit guarantee cover would be of no help,? Dinesh Singhal, who runs an electronics units in Meerut in Uttar Pradesh said.