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Low cost credit window for MSME to impart competitiveness: FIEO
Nov '09
Mr A Sakthivel, President, Federation of Indian Export Organisations(FIEO) while commenting on RBI's data on the decline in non-food credit by banks to 9.7% vis-à-vis 29.1% in the corresponding period last year stated this was only part of the picture as overall fund flow vis-à-vis the previous year was constant.

President, FIEO elaborated that while corporates had mopped up Rs.41,065 crores from the Initial Public offers (IPO's) and Qualified Institutional Placements (QIP's) [ nearly 20 times the previous year], the MSME export sector while is largely dependent on banks had to bear the brunt of recession due to lack of demand stimulus and higher cost of credit from banks.

Further, companies and banks are earning 3.5% to 4% while parking funds with Mutual Fund Companies which in turn are lending to companies with a mark-up of 50 to 100 basis profit. The cost advantage to large corporates is between 250 to 300 basis points vis-à-vis the MSME's who depend on bank credit exclusively.

The FIEO Chief explained that as the Government is reviewing the situation at present as was stated in the 'Indian Economic Summit' being held in the capital the time may be ripe to consider a 'low cost credit window' in the current global scenario for the labour intensive MSME export sector for their sustenance.

Federation of Indian Export Organisations (FIEO)

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