Inadequate and lack of timely credit, high cost of
credit, collateral requirements, etc. pose hurdles before the Micro, Small and
Medium Enterprises. Furthermore, the MSMEs are being perceived as high risk
category by Banks. However, the Government has been running Credit Guarantee
Fund Scheme for Micro and Small Enterprises to provide guarantee cover for
collateral free credit facilities extended to micro and small enterprises
(MSEs). In addition, to facilitate easy flow of credit to Micro, Small and
Medium Enterprises (MSMEs), the Reserve Bank of India (RBI) has issued
guidelines in May, 2010, which mandatorily require banks to dispense with
collateral requirement for loans upto Rs.10.00 lakh to MSEs. Furthermore, banks
have been required by the RBI to have a stipulated growth in the small and
micro unit accounts in the country.
The Government has set up a Micro Units
Development & Refinance Agency (MUDRA) Ltd. which would be responsible for
refinancing all Micro-finance Institutions (MFIs), which are in the business of
lending to micro / small business entities engaged in manufacturing, trading
and services activities. MUDRA has been set up as a NBFC (wholly owned
subsidiary of SIDBI), to start with. Besides, RIDF allocation of Rs 20,000
crore, GOI is also providing a budgetary support of Rs 3,000 crore for creation
of a Credit Guarantee Mechanism which will help in extending non-collateralised
credit to the target micro units. The Scheme is now being established and it is
too early to assess its benefits.
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