Banks told to adopt proactive approach to MSE start-ups

Published: 24th August 2013 12:10 PM  |   Last Updated: 24th August 2013 12:10 PM   |  A+A-

Even as it has chalked out ambitious plans to drive entrepreneurship and innovation, the State Government has asked banks to adopt a proactive approach for promoting and nurturing start-ups.

Taking note of the credit flow to micro and small enterprises (MSEs) by the banks, a substantial chunk of which have posted negative growth, the Micro Small and Medium Enterprises (MSME) Department has sought immediate improvement in the situation.

Analysis of the performance during 2011-12 to 2012-13 revealed that though the credit flow to MSEs grew by 38 per cent and micro enterprise accounts by 16 per cent, many banks fell short on both the accounts.

As many as 11 of 25 public sector banks along with four of seven private banks and four of six regional rural banks have posted negative growth in terms of credit flow to MSE sector. Nine public sector banks have shown negative growth in MSE accounts.

The Prime Minister’s Task Force on MSMEs has recommended at least 20 per cent year on year growth in credit flow to MSEs and 10 per cent annual growth in MSE accounts. While making adequate credit flow available to the sector, the banks should also ensure that 60 per cent of the MSE advances should go to micro enterprises.

But it is observed that the stipulations have not been achieved even by the end of the quarter ending June 2013, Additional Secretary of MSME Department FM Naik pointed out while drawing attention of the convenor of the State Level Bankers Committee (SLBC) that monitors performance of banks in priority sectors to the issue.

Most of the start-ups are covered under micro enterprises category and they should be encouraged and patronised. Success and failure are part of any business proposition but properly nurtured, a micro enterprise can take wings to become big and even a multinational company in future.

“So, the banks should tone up their risk assessment and management capacities to provide for failure of a venture as part of risk management. If we have to achieve financial inclusion and inclusive growth, financing of start-up enterprises, the risks notwithstanding, is a must”, Naik stressed.

In a bid to promote start-ups, the Government has also decided to establish about 10 small and medium enterprise (SME) incubators this year. The incubators would be funded by the Union MSME Ministry and hosted by technological universities and institutions.

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