In order to increase the availability of funds for small businesses, the Micro Small and Medium Enterprises (MSME) Ministry is seeking over 4-fold hike in Credit Guarantee Fund Scheme to Rs 10,750 crore during the 12th Plan period, an official said.
“…the corpus of (Credit Guarantee Fund) scheme has to be enhanced by an additional provisioning of Rs 10,750 crore to enable scheme to increase its…coverage,” he said.
The increase in allocation, the official said, would help in providing collateral-free loans to micro and small units which are highly unorganised but account for substantial employment in the country.
During the 11th Plan, the government had made a provision of Rs 2,500 crore for the Scheme, being operated by the ministry.
In view of the problems being faced by the MSME sector in procuring loans from banks and financial institutions, the Ministry has suggested to the Planning Commission to raise the allocation for the fund.
Almost 95 percent of the MSME sector is unorganised, the official said, adding that banks are usually reluctant to lend funds to the MSEs in absence of adequate collaterals.
In order to address the issue, the ministry had set up the scheme so that collateral-free credit could be made available to the sector.
The corpus to the fund is contributed by the government and Small Industries Development Bank of India in the ratio of 4:1, respectively.
The MSME sector contributes 45 percent to overall the manufacturing output and 40 percent exports of the country.
