Focus on credit flow to small sector

Even as the quantum of credit to micro and small enterprises has increased over the past six years, in absolute terms, its share of the total credit extended by public sector banks has decreased. This has raised concerns within the Micro, Small and Medium Enterprises MSME Ministry, which is going to take up the matter in its fifth National Board for MSME meeting on Friday.

The ministry had earlier written to the Finance Ministry and the Reserve Bank of India for the fixing of a sub-target for credit to MSE sector. However, it is learnt that the Finance Ministry has shot down the proposal, saying that in case credit to service sectors like professional and self-employed persons and small businesses is incorporated in the MSE sector, the total credit to the sector by scheduled commercial banks stands at 12.96 per cent net bank credit as on March 2007.

As per the data available, the share of the MSE sector has declined to 8 per cent of the total net bank credit in March 2007, against 14.2 per cent in March 2001. In absolute terms, however, there is a growth of 116 per cent during the same period, from Rs 48,400 crore to Rs 1,04,703 crore. After the rebuttal, the ministry is now in the process of reviewing the data on the credit flow to the sector with the RBI, to have a more accurate and realistic position, sources revealed.