TS government mulls credit guarantee fund for MSMEs

To help ease loan bottlenecks; Also plans to constitute ‘empowered committee for MSMEs’ to oversee the bank lending

Hyderabad: In a bid to remove the bottlenecks in sanctioning loans to MSMEs, the Telangana government is considering to create a credit guarantee fund on the lines of central government’s credit guarantee trust.

"The state government will guarantee the credit provided by banks and if any MSME defaults, the state government would repay 100 per cent to the banks from the earmarked fund," said Jayesh Ranjan, Commissioner for Industries. However, the details of the fund are still to be finalised, he added.

He further said the government is also considering constituting an empowered sub-committee at SLBC level to oversee the bank financing for MSMEs in the state. The proposed empowered committee will have permanent members from credit rating agencies, investment bankers, SIDBI, industry bodies etc, besides bankers.

Speaking to the media on the sidelines of the seminar organised jointly by Fappci and Assocham here on Friday, Ranjan said, “We are working out the details, and the empowered committee is expected to meet once in every quarter”.

The proposed empowered committee will also investigate into the insipient sickness and find solution, besides easing of finance for SMEs in the first and second dose of funding to scale up the operations. Ranjan further argued that there is a need to fix the responsibility of the banks for delays in sanctioning loans. Drawing parlance with the ‘single-window clearance’ scheme where the official found responsible for delays is penalized, he felt a similar timeline can be drawn even at the bank loan delays.

“In fact, we will forward ready-to-approve applications to banks (after full scrutiny),” the Commissioner Industries said. Besides the government also guarantees the banks that loan is fully repaid through credit guarantee scheme. Hence, Ranjan felt there is no need for any delay in loan sanction by the bank.

Claiming that the recently introduced industrial policy have a number of proactive provisions especially for SMEs, Ranjan said, for instance, the land in all the proposed industrial parks is reserved for small and micro industries.

“The government has created a land bank of 2.5 lakh acres across the state for industries and reserved plots for MSMEs also,” he said.

Besides, the new industrial policy mandates on the approved mega projects (which require an investment of Rs 200 crore and above or provides employment to over 1,000 people) to support SMEs by giving work-orders and even they have to be accommodated near to their factory.

The policy also proposed to develop an insurance system to the sickness in the SMEs. Ranjan said it will be developed after speaking to all the stakeholders and will be introduce in the next budget in 2015-16.