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Govt wants 10% of banks' priority sector credit to SMEs

September 30, 2008 18:00 IST

The government has plans to increase the credit flow to micro-entreprises in the country by making 10 per cent of the total priority sector lending of banks mandatory to such firms, a senior government official said.

The government and the Reserve Bank are discussing the matter on a constant basis and is likely to come out with a decision in the near future, secretary to the ministry of micro, small and medium enterprises, Dinesh Rai told reporters.

"We are hopeful that of the total priority sector lending, a minimum of 10 per cent can be reserved for small firms. We are discussing this matter with the related authorities," Rai said.

Presently, banks are required to keep atleast 40 per cent of their total loan disbursal to the priority sector which includes the micro-institutions in the country.

However, there is no specified credit limit to the small scale industries as of now.

Presently, nearly 42 million small and medium sized companies are are operating in the country, contributing nearly 40 per cent to the total exports and 45 per cent of the manufacturing output in India, Rai said.

In a bid to enhance the credit flow to the SME sector, the government had recently launched Prime Minister's Employment Generation Programme that would generate nearly 37 lakh new jobs in the country in the SME sector.


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