Home / Knowledge / News / MSME starved of funds, may impact growth - FIEO Chief
MSME starved of funds, may impact growth - FIEO Chief
Apr '09
Shri A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on his meeting with Governor, RBI on 9th April, 2009 at Mumbai on Annual Policy Consultations with the trade and industry, stated that although RBI had cut rates by 400 bps the credit portfolios of banks had shrunk to 17.3% (Rs. 4,08,099 crores) as against a growth of 22.3% (Rs.4,30,724 crores) in the corresponding period last year.

The FIEO Chief said that this is a matter of concern as RBI in January 2009 had anticipated that the reduction in rates would translate into higher bank lending and investment to 24% which in turn would enable India to achieve a 7% growth for financial year 2009.

RBI's data reveals that while the home loans growth portfolios is almost flat, oil, constructions & infrastructure companies have shown good off take but the SME sector, gems and jewellery have seen a sharp slowdown.The Banks on the other hand have “parked” about Rs. 1.32 lakh crore surplus funds with RBI till 8th April, 2009 under the reverse repo window and are unwilling to lower lending ratesand are insistingthat sub-PLR loans are liabilities which must be dispensed and that this would automatically “lower” the PLR rates.

It was elaborated that with more MSME's queuing for loan restructuring, RBI's one time dispensation last year that an account which was a standard loan as on September 1, 2008 could continue to be treated as a standard asset post restructuring if a bank received an application from a customer for rescheduling the loan before March 31, 2008 may be reviewed.

President, FIEO stated that although under the interest sub-vention scheme the Ministry of Commerce had already given Rs. 800 crores to banks, the Reserve Bank of India needs to make an assessment whether the same has been disbursed to the concerned sectors and manufacturing MSMEs under the scheme.

Federation of Indian Export Organisations

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