Even as the government has been encouraging credit lending to MSMEs by directing banks to increase exposure to the sector, MSMEs continue to face the challenge of poor credit access.
Micro, small and medium enterprise (MSME) promotion body — National Small Industries Corporation (NSIC) under the Ministry of MSME has signed a memorandum of association (MoU) with India’s biggest bank — State Bank of India to promote credit facilitation for MSMEs’ growth. “We offer 10-15 product lines under the broad heads of technology, marketing and finance. Under finance, we have a scheme called Bank Credit Facilitation where we already have a tie-up with 21 banks and now SBI has joined the list,” an NSIC spokesperson told Financial Express Online. MSMEs looking for financial assistance can approach NSIC and “we will help them with the financing without any charge from the bank.”
Even as the government has been encouraging credit lending to MSMEs by directing banks to increase exposure to the sector, MSMEs continue to face the challenge of poor credit access. The total credit outstanding of public sector banks to the sector saw a marginal increase of 7.38 per cent from Rs 8.20 lakh crore in FY16 to Rs 8.81 lakh crore in FY19. For FY17 and FY18, the amount stood at Rs 8.28 lakh crore and Rs 8.64 lakh crore respectively, as per the RBI data.
As per the MoU signed, MSMEs including those unassociated with NSIC through any of its schemes for the sector can approach NSIC seeking a loan. “Going directly to banks won’t be easy as loans are not sanctioned easily. There is documentation involved, the project report has to be created and appraised etc. NSIC will do all this on MSME’s behalf to secure the loan while NSIC’s approval also assumes significance with the bank. We can also suggest which scheme of the bank will be more suitable for MSMEs,” the spokesperson said.
Based on the project size, the loan can be applied even as there is no limit on the loan amount. Moreover, there is no fee or charges levied on SMEs for the service. The loan is approved within 10 days “if the proposal is worthy enough,” the spokesperson said. SMEs can also request NSIC for change of bank if they are unsatisfied with their respective banks.
To boost MSME finance, the government had last year in November launched — psbloansin59minutes.com in to offer credit to MSMEs for in-principle approval for a term loan or working capital loan up to Rs 1 crore. The amount was extended to Rs 5 crore last month. The portal received 2,00,660 loan applications out of which 1,59,583 were accorded in-principle approval since the launch of the portal and 1,33,448 applications were sanctioned, according to Anurag Thakur, minister of state for finance who informed the Rajya Sabha last month.
NSIC had earlier tied up with several lenders including Corporation Bank, Central Bank of India, Vijaya Bank, HDFC Bank, Yes Bank, IndusInd Bank, Federal Bank, Kotak Mahindra Bank, ICICI Bank, Tata Capital Financial Services. NSIC had in May this year signed an MoU with MSME Ministry for “provision of enhanced services by NSIC under its marketing, financial, technology and other support services schemes, for MSMEs in the country.” The Corporation is looking to boost its revenue from operation by 22 per cent from Rs 2,540 crore for FY19 to Rs 3,100 crore in FY20 along with 32 per cent increase in profitability during the year 2019-20.