Banks fail to pep up SMEs despite RBI efforts

Mumbai, March 22: Despite the government and the Reserve Bank of India cajoling and pressurising the banks to lend to the small and medium sector with liberal stimulus packages the flow of funds to this sector is a mere trickle.

“Of the about Rs 7,000-crore through the government’s stimulus packages, the banks have not dispersed even eight per cent of this amount to date,” said Mr Chandrakant Salunkhe, president, India International Trade Centre and SE Chamber of India, Mumbai. Mr Salunkhe will be meeting the joint secretary (banking), the finance secretary, the commerce secretary and the minister of state for finance among others on Monday in a bid to sort out the bottlenecks in funding and restructuring of loans for this sector.

Mr Salunkhe said that even though the government and the Reserve Bank of India have been insisting that the banks lend more to the priority sector, the banks are not keen to restructure the loans of the SME sector nor they consider their proposals for fresh loans for working capital.

He said: “If an entrepreneur wants to borrow Rs 1 crore, he is made to keep

Rs 2 crore as collateral.”

According to the RBI, the banks can give a small entrepreneur upto Rs 5 lakh without collateral under the Credit Guarantee Trust Fund for small and medium businesses and upto Rs 1crore to a small manufacturer without collateral, he added.

Since January, of the 2,000 proposals for rescheduling of loans worth about Rs 10,000 crore, barely Rs 500-600 crore have been rescheduled.

The pace of processing by the banks is very slow. “It takes about four months for a bank to consider a proposal and if at the end of this, the proposal is rejected then the entrepreneur is a big loser,” says Mr Salunkhe.

The chamber’s effort now is to get into specific demands of growth oriented sectors, and product wise demands of the sector, specially those sectors like food processing for technical upgradation, leather and footwear exports, etc.

Mr V. Venkatachalam, secretary-general of the chamber, said: “These industries are doing well but due to the financial meltdown globally their inventories are piling and working capital is shrinking.”

“These industries should be helped on a priority basis and decisions pertaining to their proposals must be taken faster,” he said.