Improved credit flow for MSME sector

The Working Group recently presented a report, including recommendations,for the MSME sector. Enhancement of the limit for collateral free loans to the MSME sector to Rs 10 lakh from Rs 5 lakh and suggestion for guarantee fee for collateral free loans to be borne by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) were included in the report.

"Initiatives like increasing the limit for collateral free loans to the MSME sector will improve the credit flow, which have always remained a major issue for the sector," said N Sharma, senior analyst at SKP securities, a small-sized trading and brokerage firm in Kolkata.

The Working Group set up by the Reserve Bank of India (RBI) to evaluate and assess the Credit Guarantee Scheme also suggested that initiation of legal proceedings as a pre-condition for getting credit facilities up to Rs 50,000 should be waived off.

"Easier loan access to the MSME sector will go a long way in ensuring greater development of the sector," said A Kumar, chartered accountant working with Tax Consultants, a small-sized tax and an investment advisory firm in Mumbai.

The Working Group has also recommended income tax exemption for CGTMSE on both guarantee fee and income on investments and has also called for offering CGTMSE the liberty to adjust the guarantee fee based on the modelling of the distribution claims.

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