Credit and finance for MSMEs: Seeking policies in the upcoming union budget to boost credit access for traders, the traders’ body Confederation of All India Traders (CAIT) on Thursday said the Reserve Bank of India (RBI) has failed to provide easy access to finance for traders which led to underutilisation of their capacities and capabilities, turning into a “total loss situation to the national economy.” In a letter to the finance minister Nirmala Sitharaman, CAIT said the RBI has always put its prime focus on the corporate sector only.
“It didn’t deem fit for the RBI to consult the trade association ever to understand their (traders’) financial needs (even) though the non-corporate sector excluding agriculture is contributing magnificently to the national exchequer and after agriculture, (they) are the largest employment provider in the country. Yet the retail trade could not find any place in financial policies,” CAIT said in the letter ahead of budget.
Praveen Khandelwal, Secretary General, CAIT in the letter requested Sitharaman for “advising the RBI to ensure smooth and easy access of finance to the trading community.” Khandelwal also sought a policy in the budget to lay special emphasis on non-banking financial companies (NBFCs) and microfinance institutions (MFIs) for lending to small businesses. Moreover, he also suggested strengthening of NBFCs and MFIs with requisite finance by banks and financial institutions at a lower rate of interest for affordable loans to small businesses.
“While urging you for support policies for finance to small businesses, we would like to mention that the business community of India is facing a huge crunch of financial liquidity,” Khandelwal added as he reminded the government for an urgent rollout of the pending National Retail Policy, e-commerce policy and formation of e-commerce regulator.
For the uninitiated, wholesale and retail trade were brought under the MSME definition in 2021 to enable traders for priority sector lending from banks. Moreover, retail and wholesale trades by micro and small enterprises were brought at par with other segments or activities eligible in December 2022 for credit guarantee cover under the government’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This enhanced the credit limit for traders from Rs 1 crore to Rs 2 crore.
Meanwhile, non-priority bank credit to retail and wholesale trade in November 2022 had jumped 16 per cent year-on-year (YoY) to Rs 7.33 lakh crore from 10.2 per cent during November 2021 at Rs 6.32 lakh crore, according to the RBI’s sectoral deployment data.