In order to improve access to credit for micro, small and medium enterprises (MSME), the Confederation of Indian Industry (CII) has suggested several short-term measures to the Reserve Bank of India (RBI). It highlighted that MSMEs at present have been facing issues arising out of delayed decisions from banks on granting access to credit, additional collateral requirements, demand for personal guarantees, additional charges and conditionalities on bank guarantees.
CII suggested a 'One, Turn Around Time (TAT)' for sanction and enhancement of limits for working capital or term loans be fixed at 15 days from the date of application and for disbursement, 15 days from the date of sanction. It recommended that Letters of Undertaking (LoUs) be permitted for Buyers' Credit for cases where the MSMEs are incurring capital expenditure. It further suggested that MSMEs having no defaults should progressively receive discounts on the normal margin requirements and commensurate with their lower risk profile, similar to no claim bonus discounts for insurance. Moreover, RBI may allow banks to sanction Buyers Credit facility to MSMEs, wherever import of raw materials is being done under Letter of Credit.
It also sought a cap of 133% on the value of collateral banks can demand relative to the loan value, and 15% on the margin money requirements on bank guarantees and loans. Besides, as per the RBI data, Gross bank credit to micro and small industries fell 1.4% in September from a year earlier.