Patna, Nov. 30: Deputy chief minister Sushil Kumar Modi and industries minister Renu Kumari Kushwaha today exhorted banks to sanction loans to the micro, small and medium enterprises (MSMEs), which, if flourish, could provide a boost to the state’s economy, including generating huge employment opportunities.
“Big factories are capital intensive and technology driven. It pumps in thousands of crores at one go, but generates a few thousand jobs. On the other hand, the MSME sector is less capital intensive with a huge potential of employment generation. Hence, banks should not hesitate in advancing loans to firms belonging to the MSME sector, as it could give a major fillip to the state’s economy,” Modi said, while addressing a seminar on “MSME- Linkages and Partnerships” organised by the Indian Chamber of Commerce.
Modi, however, said the banks have made some improvement on loan advances to the MSME sector. The banks have advanced a loan of Rs 1,351 crore to the MSME sector in 2009-10, which witnessed a phenomenal rise of up to Rs 2,324 crore in 2010-11 (a jump of 72 per cent over the previous year), Modi said, adding that the banks have so far given loans of Rs 1,300 crore till September against a target of Rs 2,441 crore in the current fiscal.
Modi, who also holds the finance portfolio, wondered why the banks are reluctant in advancing loans under Credit Guarantee Trust Fund for Micro And Small Enterprise (CGTMSE), which assures banks around 75 to 80 per cent recovery of loans. Similarly, banks have also not fared well in providing loans to entrepreneurs willing to buy vehicles for commercial purposes.
“The performance of PM’s employment generation programme is not at all satisfactory in the state despite the support of CGTMSE under which industrial loans up to Rs 1 crore could be taken without any collateral. But the scheme has failed to provide any support to the prospective local entrepreneurs who have showed interest to invest in changed economic environment of the state,” Modi said.
As per the Centre’s scheme, banks would be reimbursed up to 80 per cent of their loan amount if the firm collapses but even then they (banks) were not inclined to provide loans, he added.
Emphasising on holding regular training programmes for entrepreneurs, the finance minister said banks and industries need to work in tandem for providing training programme for skill development among micro and small enterprises.
Industries minister Renu Kumari Kushwaha said the MSME sector plays a crucial role in the state’s economy, as it contributes to about 16 per cent of the state’s gross domestic product (GDP), whereas this sector contributes to around 26 per cent in the national GDP.
Of 3,725 sick units, which were to be rehabilitated, the banks found just three units fit for getting loans for their revival, Kushwaha said, while questioning the manner in which the banks sanction loans.
“Banks should shed the attitude of giving loans to big firms only. Otherwise, the state will have to suffer a lot. Banks must adopt humanitarian view while giving loans to the MSME sector,” Kushwaha said.
Industries principal secretary C.K. Mishra emphasised the need to have better access to finance for the MSME sector without which development can’t take place.
There are 1.9 lakh units in the MSME sector and of this, about one lakh are running. These factories have not gone sick in the past few years, rather it has happened over the past decade because of non-availability of funds, Mishra said.
“The state government is trying its best revive the sick units. There are 26 such sick units which could be revived but unfortunately, these firms did not get loans from the banks. Our strength is in food processing and agro-based industries. We have received proposals for opening of 117 rice mills,” Mishra said.
Principal secretary of planning and development Vijoy Prakash, Indian Chamber of Commerce director-general Rajeev Singh, industries director B.N. Jha, RBI general manager Mohan Yadav also spoke on the occasion.
