Promotion of MSME Sector

The details of Gross Non-Performing Assets (GNPAs) and GNPA ratio to large industries and Corporate Sector and MSE Sector during the last fifteen years is as per details given below.

  Source: RBI

Further, the following measures has been taken by Government /RBI to enhance credit flow to the  Micro, Small and Medium Enterprises (MSME) sector:

i) Under Priority Sector Lending (PSL) a target of 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, has been prescribed for Scheduled Commercial Banks (SCBs) for lending to Micro Enterprises.

ii) Computation of working capital requirements of MSE units to be done by banks on the basis of simplified method of minimum 20% of the projected annual turnover of the unit for borrowal limits up to ₹ 5 crore.

iii) A Standing Advisory Committee has been constituted by the Reserve Bank of India, with Deputy Governor as Chairman, officials of Ministry of Micro, Small and Medium Enterprises, Banks and Associations as members to discuss issues concerning of Micro, Small and Medium Enterprises.

iv) Public Sector Banks were advised in August, 2005 to operationalise at least one specialized MSE branch in every district and centre having a cluster of MSE enterprises. As on March 31, 2016, there were 2864 specialised MSE branches.

v) SCBs have been mandated not to accept collateral security in the case of loans upto ₹ 10 lakh extended to units in the MSE sector. Banks have also been advised to strongly encourage their branch level functionaries to avail of the Credit Guarantee cover, including making performance in this regard a criterion in the evaluation of their field staff.

vi) In terms of the recommendations of the Prime Minister’s Task Force on Micro, Small and Medium Enterprises (MSMEs) constituted by the Government of India, all Scheduled Commercial Banks (SCBs) have been advised on June 29, 2010 as under:

i)   Achieve a 20 per cent year-on-year growth in credit to micro and small enterprises to ensure enhanced credit flow;

ii)   Allocate 60% of the MSE advances to the micro enterprises and

iii)  Achieve a 10% annual growth in number of micro enterprise accounts.

vii) Banks have been advised that they should mandatorily acknowledge all loan applications, submitted manually or online, by their MSME borrowers and ensure that a running serial number is recorded on the application form as well as on the acknowledgement receipt. Banks are further encouraged to start Central Registration of loan applications.

viii) The Banking Codes and Standard Board of India (BCSBI) formulated a Code of Bank's Commitment to Micro and Small Enterprises in 2008. The new code 2015 has reduced the time frame for disposal of loan applications.

ix) In order to solve the problem of delayed payment to MSMEs, RBI has come out with the guidelines for setting up and operating the Trade Receivables Discounting System (TReDS). The scheme is for setting up and operating the institutional mechanism to facilitate the financing of trade receivables of micro, small and medium enterprises (MSMEs) from corporate and other buyers, including government departments and public sector undertakings (PSUs) through multiple financiers.

x) All Scheduled Commercial Banks (excluding RRBs) have been advised in April 2014 that they should take into account the incentives available to them in the form of the credit guarantee cover of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the zero risk weight for capital adequacy purpose for the portion of the loan guaranteed by the CGTMSE and provide differential interest rate for such MSE borrowers, than the other borrowers.

The Government has taken sector specific measures (Infrastructure, Power, Road, textiles, Steel etc.) where incidence of NPA is high to alleviate the existing stress in these sectors. The Insolvency and Bankruptcy code (IBC) has been enacted and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and The Recovery of Debts due to Banks and Financial Institutions (RDDBFI) Act have been amended to improve resolution/recovery of bank loans. Six new Debt Recovery Tribunals (DRTs) have been established for improving recovery.

Further, RBI has taken a number of measures to improve the situation viz.  Corporate Debt Restructuring (CDR), Formation of Joint Lenders’ Forum (JLF), Flexible Structuring for long term project loans to Infrastructure and Core industries (5/25 Scheme), Strategic Debt Restructuring Scheme (SDR) and Sustainable Structuring of Stressed Assets (S4A).

This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Rajya Sabha today.