RBI directs Banks to double credit flow to SMEs

Bangalore, Feb 23 (UNI) Reserve Bank of India (RBI) has directed the Banks to double the credit flow to Small and Medium Enterprises (SMEs) by 2009-10 to Rs 135,200 crore from Rs 67,800 Crore in 2004-05, RBI Regional Director Devaki Muthukrishnan said today.

Speaking at a Seminar on 'Emerging Trends in Banking Products- Focus on SMEs and Exporters' organised by Federation of Karnataka Chamber of Commerce and Industry (FKCCI) here, she said public sector banks have been advised to fix their own targets for funding SMEs to achieve a minimum 20 per cent year on year growth in credit to SMEs.

Ms Devaki Muthukrishnan said SMEs were the second largest employment generator, next to Agriculture in the country and accounted for 45 per cent of the exports. ''Hence, with rupee appreciation, it is necessary to ensure credit inflow to these units to strengthen these units,'' she added.

She said recognising the need for SMEs to get easy access to credit and specialised service and reduce transaction costs, banks have been advised to set up specialised SME branches and redesignate their specialised SSI branches as SME branches.

The banks have also been advised to adopt cluster-based approach for SME financing and displaying instructions and guidelines formulated by banks as well as by RBI on their websites.

She said varied banking products were available for SMEs in the form of loans, trade services, insurance and risk management facilities which are intended to help SMEs manage the business with greater efficiency. ''The need of the hour is to be aware of these products and use them to the advantage of one's business.'', she added.

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