Saturday, August 30, 2014: The MSME Summit 2014 concluded recently and it was attended by several CEOs of micro, small and medium sized companies. One participant complained that a public sector bank sought collateral when an application was submitted for a loan under the Credit Guarantee Trust for Micro and Small Enterprises Scheme.
The bank is supposed to give a guarantee-free loan of Rs 10 million maximum, under this scheme. Panel member Amarendra Sinha, Additional Secretary and Development Commissioner, Ministry of Micro, Small and Medium Enterprises (MSMEs), said, “The bank manager will be suspended.” Now it seems that the MSME sector’s destiny will be renewed very soon, courtesy MSME Ministry. The steps which have been announced in the latest Budget hold necessary promises and they come at a time when the MSME sector’s financial output has dipped to 38.48 per cent in 2010-11.
Now, the ministry is working on giving a new look to the MSME sector and now companies will be classified on the basis of investments in plants and machineries, not exceeding Rs 10 million. If promotional schemes and policies are to be delivered properly then small businesses should be defined in a more specific way. While most banks accept the definition based on investment limits for lending purposes, the Excise department looks for turnover while MSMEs are defines by the Factories Act based on number of people employed.
But MSMEs have been facing difficulties in this era of inflation. Ever since MSME Development Act 2006 was formulated, equipment prices increased. Anil Bhardwaj, Secretary General of the Federation of Indian Micro, Small and Medium Enterprises, said, “There are businesses one can start with peanuts and there are those like pharmaceuticals or tier-II auto component makers that need large investments. Investments in units that make incense sticks or crackers may be low but turno-ver and number of people employed can be huge.” Bhardwaj added, “As of now, less than five per cent of India’s MSMEs get bank funding.”
