Staff Reporter | 17 Jun, 2008
Union Finance Minister P. Chidambaram has advised state-run banks, to lend more to micro, small and medium enterprises (MSMEs) to boost economic growth, export, create employment and wealth, during a bank function in Bangalore.

"Banks should shed their conservatism and come forward to lend more to entrepreneurs and SMEs with credit guarantees. Banks should be willing to take risk when entrepreneurs are ready to do so," said Chidambaram.

Releasing the 100,000th credit guarantee approval under the credit guarantee fund trust for micro- and small enterprises, the minister said institutional credit to the MSME sector had a long way to go in the matter of increasing the coverage and raising the limit.

"The SME sector is the most vibrant in the economy, next only to the farm sector in terms of value and goods, productivity and exports, job creation. The sector accounts for about 40 percent of the country's total exports. Yet for many reasons, the SME sector remains neglected and unnoticed by other stakeholders,' he said.

Under the credit guarantee fund trust, set up by the central government with the state-run Sidbi (Small Industrial Development Bank of India) with a corpus of Rs.15.84 billion, Millennium Steel Rolling Mill at Harihar in Davangere district became the 100,000th beneficiary of the Rs.4 million loan sanctioned by Canara Bank.

Of the 2.6-million registered SME units across the country, only 100,000 have been able to get institutional credit, while a staggering 10.3 million unregistered units still remain without it.

"A radical change is taking place in the mindset of young India,' Chidambaram told the bankers. 'A large number of people are ready to take risk, willing to become entrepreneurs at a young age to create jobs, share wealth with other stakeholders. They need credit. The banks should come forward, take risk and guarantee credit to such entrepreneurs."

Chidambaram also advised the nationalised banks to raise the loan amount to SMEs, taking advantage of the Rs.20-billion risk fund set up by the central government through SIDBI for refinancing.

"We are committed to increase the corpus of the credit guarantee fund trust to Rs.26.5 billion to facilitate banks to lend more credit and to as many entrepreneurs and SMEs as possible. The banks should enlarge the credit limit from Rs.100,000 to Rs.500,000 and then to Rs.1 million and extend the credit to at least one million entrepreneurs and SMEs," Chidambaram said.