Strategies to Strengthen Credit Flow to MSME Sector.

Strategies to Strengthen Credit Flow to MSME Sector
While the MSME sector has enough potential to grow in the coming years and continue to make significant contribution to the country’s industrial output, exports and employment generation, enterprises therein are starved of bank credit. Hardly 40 per cent of the total credit requirement is met through formal institutional sources. Further, delay in credit sanction is commonly observed. They also experience innumerable difficulties in complying with terms and conditions of loan sanction. Hence, it calls for an analysis of problems associated with bank credit, a review of steps taken by the government and the Reserve Bank of India (RBI) and offer suggestions to ensure adequate, timely and hassle-free bank credit to MSMEs. Towards this end, the present article is written for the benefit of policy-makers and branch managers engaged with banks and financial institutions. Entrepreneurs need short term (working capital), medium term and long term finance which are provided by public and private sector banks, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD), Regional Rural Banks (RRBs), Urban Co-operative Banks (UCBs) and foreign banks. Public sector banks (PSBs) were conceived and functioned as instruments of social change and also played a pivotal role in developing the SSI sector. Development of the SSI sector depends upon the adequate and timely supply of credit. Hence, it is proposed to assess how far development of the SSI sector on one hand and bank credit on the other, are correlated by studying the secondary data.

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