NEW DELHI: The Micro, Small and Medium Enterprises (MSME) Ministry will hold consultations with banks to persuade them for improving flow of credit to small sector.
"We are in the process of holding consultations with various banks, both in private and public sector, as easier access to credit is paramount to the growth of anysmall business," Minister of State (Independent Charge) for Micro, Small and Medium Enterprises K H Muniyappa told PTI.
To start with, the Ministry will meet Karanataka-based banks this week.
"On June 21, we will hold consultations with various banks including Canara BankBSE -0.33 % and United Bank, in Bengaluru," Muniyappa said.
The Ministry will hold such discussions in other states as well, he added.
The Prime Minister's Task Force on MSMEs had recommended 20 per cent year-on-year growth in credit to micro and small enterprises to ensure enhanced credit flow.
However, most of these units still face problems in getting easy access to finance.
Muniyappa said the major factors affecting growth of the sector include shortage of working capital, lack of demand, marketing problems, shortage of raw-material, power crunch and labour issues.
"Therefore, there is a need to make these units more competitive by enhancing the availability of institutional credit, promoting innovation, by providing adequate infrastructure, meeting demands for skill development and strengthening marketing support," he said.
On MSMEs share in the country's total exports, he said, "Last year, the sector's contribution to India's total exports was 40 per cent, but this year it has declined to 36 per cent mainly due to weak demand in global markets. Now, we are trying to increase the share beyond 40 per cent."
The sector contributes over 8 per cent to the country's Gross Domestic Product ( GDP) and accounts for 45 per cent of the manufacturing sector. There are around 3.6 crore such enterprises, employing over 8 crore people.
In the 12th Five-Year Plan, the Budget allocation for the sector has been more than doubled to Rs 24,000 crore from Rs 11,000 crore in the last plan period.