Banks flouting Rs 1 cr collateral-free norms for MSMEs

New Delhi, Jun 12 (KNN) Banks continue to insist on collaterals from the MSMEs despite clear provisions for providing collateral-free loans to the micro, small and medium enterprises  up to Rs one crore even as the demand for raising the limit to Rs five crore came up at the RBI-sponsored Town Hall meetings with the industry associations.

RBI officials yesterday met the industry body FISME and other officials from the public as well as private sector banks to discuss the agenda for the 27th meeting of the Empowered Committee on MSMEs for the national capital territory of Delhi.

The meeting was chaired by the Regional Director, RBI Delhi Region, Deepak Singal. The other officials present at the meeting were General Managers of the Rural Planning and Credit Department (RPCD), RBI, Sonali Sengupta and Rachna Dikshit; and AGM, RPCD, RBI Vanadana Maheshwari.

Recently, RBI had organized two town hall meetings in the industrial areas of the national capital to discuss the issues faced by the MSMEs with the banks and take their feedback. The meeting was organised under the aegis of FISME (Federation of Indian Micro and Small & Medium Enterprises).

One of the major points that emerged out of the feedbacks received by RBI from Badli Industrial Estate Association and Naraina Industrial Area was the lack of awareness of the collateral free MSME loans and raising its limit.

“About 18 per cent of MSMEs are not aware of collateral free MSME loans,” Rural Planning and Credit Department, RBI said in its agenda.

Based on the feedback, the RBI also said “The banks invariably insist on a collateral security in spite of clear provisions for collateral free loans up to an amount of Rs one crore.”

The limit of Rs one crore for Collateral free loans in not in tune with the present day economics of scales and needs upgradation to at least Rs five crore.

Making availability of finance easier for the MSMEs and lowering the rate of interest were also the key issues raised by the entrepreneurs in the town hall meetings.

“Banks are to be advised to shorten the process of sanctioning and disbursal of loans and documentation be made easier,” RBI said in its agenda.

Other points that figured in the feedback were – charges like account management fees, submission of guarantee, SMS on account activity, cheque book facility, concessional rates, etc.

About 40 per cent of MSMEs had no knowledge about the Government Schemes promoting the sector, the apex bank said emphasizing the need to open MSME specific branches in all the industrial areas.

Further, in order to increase credit towards the MSE sector, it is necessary to open more number of new micro accounts.

According to RBI, in the 26th Meeting of the Empowered Committee on MSMEs for the National Capital Territory of Delhi, it was decided that every branch of the bank should open at least five micro accounts in a quarter.

The total number of micro accounts opened by the 20 banks in October-December 2013, was 17325, while in January-March 2014, it was 13402.

“It is observed that some banks have very few new micro accounts despite having significant branch presence,” RBI said.

On rehabilitation of sick MSE units, RBI said, “Banks are still putting very few units under nursing.”

The amount involved in the sick MSE units is 3.09 per cent of total MSE credit as against 2.49 per cent as on December 2013, according to the data for March 31, 2014.

Industries department may brief the house regarding the latest policy changes made by the State, Central Government relating to development of MSME sector in the region, RBI stated in its 11-point agenda.

Also, SIDBI representative may please appraise of the latest policy guidelines issued and schemes announced for MSME sector, it added.

Further, RBI has stated in the agenda that the representatives from MSME-DI, New Delhi, should apprise the committee of the latest initiatives taken by them towards the development of various clusters in NCT of Delhi and training initiatives for entrepreneurs and skill development of micro and small entrepreneurs.