Press Information Bureau

Government of India

Ministry of Finance

26-August-2011 17:23 IST

Loans to MSME Sector

Based on the recommendations of Prime Minister’s Task Force on MSME, the Reserve Bank of India (RBI) advised banks:

i) To achieve a 20% year-on-year growth in credit to micro and small enterprises to ensure enhanced credit flow;

ii) The allocation of 60% of the MSE advances to the micro enterprises is to be achieved in stages viz. 50% in the year 2010-11, 55% in the year 2011-12 and 60% in the year 2012-13 and

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

RBI has reported that 10 Banks in 2011 have achieved the target of 50% of total MSE lending to Micro enterprises. Further, 9 Banks have achieved more than 10% year-on-year growth in the number of Micro enterprises accounts as on March 2011. It has also been reported by RBI that 22 Banks including State Bank of India (SBI) have achieved more than 20% year-on-year growth in credit to MSE sector as on March 2011. The RBI is closely monitoring the achievement of targets by banks on a half-yearly basis, i.e., March and September each year. The matter is followed up with the underperforming banks by the Government as well as RBI by holding meetings with banks to impress upon the banks to devise strategies to gear up the credit mechanism for the sector.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Lok Sabha today.

DSM/SS/sl

MSME credit growth targets require banks to expand microenterprise lending, monitored through biannual reviews and follow up. Banks were advised to meet operative targets: year on year credit growth to micro and small enterprises; staged allocation of MSE advances favouring micro enterprises with interim benchmarks; and annual growth in microenterprise accounts. Performance is monitored biannually, with reported bank level achievements and coordinated follow up involving meetings and remedial strategies for underperforming banks.