Keen to soften the blow for the MSME sector that was hit by the double whammy of demonetisation and the GST, the government has asked the chiefs of public sector banks (PSBs) to undertake an “in-depth analysis of the progress made and issues in availability of credit still faced by MSMEs”. The state-run banks have to ensure that MSMEs need not “suffer for want of credit”, the finance ministry said on Thursday.
Latest RBI data showed credit to industry went up by just 6.9% year-on-year as of April 26, while overall non-food credit growth was as much as 11.9%. Importantly, loans to industry was mostly cornered by large players and growth in credit to micro and small units, and medium enterprises was just 1% and 3.5%, respectively.
While doing the analysis of credit flow to MSMEs, the nodal general manager of the PSB concerned needs to collect information on MSMEs who are taking credit from the bank; MSME accounts that have turned bad; MSME accounts where restructuring/resolution has been done; details of new MSMEs covered during the campaign (launched by Prime Minister Narendra Modi in November 2018) and details of MSMEs still uncovered.
They have to report the details with the department of financial services on a weekly basis.
Modi had in November last year launched a scheme for MSMEs to avail of loans in 59 minutes, as the government sought to step up focus on this sector that creates massive jobs and accounts for a sizeable chunk of exports. Last year, the government also permitted promoters of stressed MSMEs who are not wilful defaulters to bid for bad assets under the Insolvency and Bankruptcy Code, while those of larger firms are barred from doing so. Even the Reserve Bank of India allowed a one-time restructuring of existing loans of MSMEs (up to Rs 25 crore) that were in default but “standard” as on January 1, 2019.