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I am thankful to Mrs. RICHA SINGH for providing me the task of preparing the Term Paper of
Study on role of Financial Institutions in promoting MSME Sector in India. We at Lovely
believe in taking challenges and the term paper provided me the opportunity to tackle a practical
challenge in the subject of FIS. This term paper tested my patience at every step of preparation
but the courage provided by my teachers helped me to swim against the tide and move against
the wind.


 c#


þ. Executive Summary
2. Financial Institution
a. Introduction
b. Reserve Bank of India
c. Commercial Banks in India
d. Credit Rating Agencies in India
e. Securities and Exchange Board of India
3. Types of Financial institutions
a. National Level Institutions
b. State Level Institutions
4. The Micro, Small and Medium Enterprises
a. Introduction
b. Classification
5. Role of Financial Institutions
a. Significance & Role of SMEs Credit Rating Agencies
6. Financial Institutions in promoting MSME Sector in India.
7. Financial Institutions in promoting MSME Sector in India by Govt.
8. Small Industries Development Bank of India (SIDBI)
a. Objectives
b. Channels of Assistance
c. Development And Support Services
9. Promotion
a. Rs 3062 crore loan to MSME, auto, housing sectors
b. Govt launches design scheme for MSME units
c. Policy on purchasing 20% PSU requirements from MSEs
d. FinMin, RBI to direct banks to step up credit to MSME
e. 60 pc of MSME loans to provide for micro units
þ0.References
 34!!

In India, clusters of micro, small and medium enterprises are in existence for decades and
sometimes even for centuries. Over 6000 such clusters have been identified. Promoting
enterprises situated in these clusters is being done for years. However, it is only of late that
holistic programmers and schemes for developing MSME clusters have gathered pace in India.
Interestingly, the cluster development process is also being discussed or tested out for its impact
on various thematic issues including poverty reduction, corporate social responsibility, human
resource development, livelihood financing, etc. The principles of corporate social responsibility
(CSR),now referred to as Enterprise Social Responsibility (ESR) though far from being
universally established, are making an inroad into how the private sector operates. However, the
large numbers of small and medium enterprises (MSMEs) in developing countries have so far
played a marginal role in the CSR movement.





  
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Financial institutions are government-regulated or private entities that offer financial services to
their customers. These institutions control the flow of cash from an investor to a company and
vice versa within and outside a country. Financial institutions cater to clients ranging from
individuals to big organizations, depending on their size and the services offered. Broadly
speaking, financial institutions deal in the sectors pertaining to mortgage, automobile,
homeowner, personal business and corporate finance.

The Financial Institutions in India mainly comprises of the Central Bank which is better known
as the Reserve Bank of India, the commercial banks, the credit rating agencies, the securities and
exchange board of India, insurance companies and the specialized financial institutions in India.

42'
The Reserve Bank of India was established in the year þ935 with a view to organize the financial
frame work and facilitate fiscal stability in India. The bank acts as the regulatory authority with
regard to the functioning of the various commercial bank and the other financial institutions in
India. The bank formulates different rates and policies for the overall improvement of the
banking sector. It issue currency notes and offers aids to the central and institutions governments.

!!2'
The commercial banks in India are categorized into foreign banks, private banks and the public
sector banks. The commercial banks indulge in varied activities such as acceptance of deposits,
acting as trustees, offering loans for the different purposes and are even allowed to collect taxes
on behalf of the institutions and central government.


""
The credit rating agencies in India were mainly formed to assess the condition of the financial
sector and to find out avenues for more improvement. The credit rating agencies offer various
services as:
@ Operation Up gradation
@ Training to Employees
@ Scrutinize New Projects and find out the weak sections in it
@ Rate different sectors

The two most important credit rating agencies in India are:

@ CRISIL
@ ICRA

 3%"2
The securities and exchange board of India, also referred to as SEBI was founded in the year
þ992 in order to protect the interests of the investors and to facilitate the functioning of the
market intermediaries. They supervise market conditions, register institutions and indulge in risk
management.

 5
The specialized financial institutions in India are government undertakings that were set up to
provide assistance to the different sectors and thereby cause overall development of the Indian
economy. The significant institutions falling under this category includes:

@ Board for Industrial & Financial Reconstruction

@ Export-Import Bank Of India
@ Small Industries Development Bank of India
@ National Housing Bank
ÿ1c
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I shall now say a few words about the factors that are important in building a stable financial
system. Most generally, a stable financial system can be described as a financial system that is
able to withstand shocks without giving way to cumulative processes which could impair the
allocation of savings to investments and the processing of payments in the economy. How do we
get there?

þ. First, financial system architecture should be carefully planned. Different stages of

financial development require adequate institutional processes to be in place. Here, one
can refer to the sequencing laid out by IMF in recent years and to the European
experience with opening and gradually liberalizing the financial sector during the þ980s
and þ990s.

2. Second, a solid micro supervision of the financial sector and individual institutions
should be in place.

3. Third, close co-operation and exchange of information between the central bank and
supervisory authorities is warranted at all times and especially in periods of financial
stress. I will refer to this more extensively in a moment.

4. Fourth, there are several, complementary public policies that are typically needed to
sustain or build up confidence in financial institutions.

@  . If fiscal authorities, as in the euro area, are restricted in their ability to
run deficits or accumulate large debts, an important source of financial market stress and
financial instability is removed.

@  . As is now widely accepted, monetary authorities should in the first
place try to guarantee price stability, being the best possible contribution it can make to
growth in the medium to long-term. Indirectly, this should also be conducive to
supporting financial stability, as the economy will have less macro uncertainties to deal
with, when allocating resources. However, it goes without saying that the central bank
should take an active interest in monitoring financial sector developments, given the
importance of the sector, also from a monetary policy (transmission) perspective, and
given its importance in the economic system (intermediation between lenders and
borrowers). In some cases, when financial stability is threatened, monetary policy may be
used as a tool to support the financial sector. This support may come not only through
interest rate policy, but also and most powerfully through the central bank's role as a
lender of last resort, that is, in providing final liquidity when solvent commercial banks
suffer liquidity strains
c 

Financial institutions can be categorized into the following types, based on the services offered
by them:


!!#': These institutions offer services such as insurance, mortgages,
loans and credit banks.

#': They are cooperative financial institutions, generally controlled by
members who have accounts in the firm. These unions offer direct debits, direct
deductions from payroll, cheaper insurance facilities and standing order facilities.
 4" These associations offer loans, mortgages,
insurance, credit cards and interest to their clients.

 '#'"!: These firms help individuals and corporate invest in stock

market. Stock brokerage firms also offer insurance, mortgages, credit cards, securities,
loans, check writing and money market services to clients.
 ! : Insurance companies provide a cash cover in lieu of premium
to policyholders. Services such as insurance, securities, mortgages, loans, credit cards and
check writing are offered by these firms.


 They offer services such as insurance, securities, mortgages, loans, credit
cards and cash management.
 :A mutual fund is a professionally managed type of collective
investment scheme that pools money from many investors and invests typically in
investment securities such as stocks, bonds, short-term money market instruments, other
mutual funds, other securities, and/or commodities such as precious metals.




 4

A wide variety of financial institutions have been set up at the national level. They cater to the
diverse financial requirements of the entrepreneurs. They include all India development banks
like IDBI, SIDBI, IFCI Ltd, IIBI; specialized financial institutions like IVCF, ICICI Venture
Funds Ltd, TFCI; investment institutions like LIC, GIC, UTI; etc.

þ. $4 !2'627$ Includes those development banks

which provide institutional credit to not only large and medium enterprises but also help
in promotion and development of small scale industrial units.

 Industrial Development Bank of India (IDBI): was established in July

þ964 as an apex financial institution for industrial development in the country. It
caters to the diversified needs of medium and large scale industries in the form of
financial assistance, both direct and indirect. Direct assistance is provided by way
of project loans, underwriting of and direct subscription to industrial securities,
soft loans, technical refund loans, etc. While, indirect assistance is in the form of
refinance facilities to industrial concerns.
 Industrial development Bank of India (IDBI): was the first development
finance institution set up in þ948 under the IFCI Act in order to pioneer long-term
institutional credit to medium and large industries. It aims to provide financial
assistance to industry by way of rupee and foreign currency loans,
underwrites/subscribes the issue of stocks, shares, bonds and debentures of
industrial concerns, etc. It has also diversified its activities in the field of
merchant banking, syndication of loans, formulation of rehabilitation
programmes, assignments relating to amalgamations and mergers, etc.
 Small Industries Development Bank of India (SIDBI): was set up by the
Government of India in April þ990, as a wholly owned subsidiary of IDBI. It is
the principal financial institution for promotion, financing and development of
small scale industries in the economy. It aims to empower the Micro, Small and
 Medium Enterprises (MSME) sector with a view to contributing to the process of
economic growth, employment generation and balanced regional development.

 2'  was set up in þ985 under the

Industrial reconstruction Bank of India Act, þ984, as the principal credit and
reconstruction agency for sick industrial units. It was converted into IIBI on
March þ7, þ997, as a full-fledged development financial institution. It assists
industry mainly in medium and large sector through wide ranging products and
services. Besides project finance, IIBI also provides short duration non-project
asset-backed financing in the form of underwriting/direct subscription, deferred
payment guarantees and working capital/other short-term loans to companies to
meet their fund requirements.

2.  567$ are the institutions which have been

set up to serve the increasing financial needs of commerce and trade in the area of
venture capital, credit rating and leasing, etc.

 
0
 !60
7 formerly known as Risk
Capital & Technology Finance Corporation Ltd (RCTC), is a subsidiary of IFCI
Ltd. It was promoted with the objective of broadening entrepreneurial base in the
country by facilitating funding to ventures involving innovative
product/process/technology. Initially, it started providing financial assistance by
way of soft loans to promoters under its 'Risk capital scheme¶. Since þ988, it also
started providing finance under 'Technology finance and Development scheme' to
projects for commercialization of indigenous technology for new processes,
products, market or services. Over the years, it has acquired great deal of
experience in investing in technology-oriented projects.
 

0 formerly known as Technology Development &
Information Company of India Limited (TDICI), was founded in þ988 as a joint
venture with the Unit Trust of India. Subsequently, it became a fully owned
subsidiary of ICICI. It is a technology venture finance company, set up to
sanction project finance for new technology ventures. The industrial units assisted
 by it are in the fields of computer, chemicals/polymers, drugs, diagnostics and
vaccines, biotechnology, environmental engineering, etc.
 c!
 . (TFCI):- is a specialized
financial institution set up by the Government of India for promotion and growth
of tourist industry in the country. Apart from conventional tourism projects, it
provides financial assistance for non-conventional tourism projects like
amusement parks, ropeways, car rental services, ferries for inland water transport,
etc.

3. 4!$ are the most popular form of financial intermediaries,

which particularly catering to the needs of small savers and investors. They deploy their
assets largely in marketable securities.

 
 6
7 was established in þ956 as
a wholly-owned corporation of the Government of India. It was formed by the
Life insurance corporation act, þ956, with the objective of spreading life
insurance much more widely and in particular to the rural area. It also extends
assistance for development of infrastructure facilities like housing, rural
electrification, water supply, sewerage, etc. In addition, it extends resource
support to other financial institutions through subscription to their shares and
bonds, etc. The Life Insurance Corporation of India also transacts business abroad
and has offices in Fiji, Mauritius and United Kingdom. Besides the branch
operations, the Corporation has established overseas subsidiaries jointly with
reputed local partners in Bahrain, Nepal and Sri Lanka.
 c6 c7 was set up as a body corporate under the UTI
act, þ963, with a view to encourage savings and investment. It mobilizes savings
of small investors through sale of units and channelizes them into corporate
investments mainly by way of secondary capital market operations. Thus, its
primary objective is to stimulate and pool the savings of the middle and low
income groups and enable them to share the benefits of the rapidly growing
industrialization in the country. In December 2002, the UTI Act, þ963 was
 repealed with the passage of UTI Act, 2002, paving the way for the bifurcation of
UTI into 2 entities, UTI-I and UTI-II with effect from þst February 2003.
 
 6
7 was formed in
pursuance of the General insurance business act, 2002 for the purpose of
superintending, controlling and carrying on the business of general insurance or
non-life insurance. Initially, GIC had four subsidiary branches.


 4

Several financial institutions have been set up at the State level which supplements the financial
assistance provided by the all India institutions. They act as a catalyst for promotion of
investment and industrial development in the respective States. They broadly consist of 'State
financial corporations' and 'State industrial development corporations'.

' 
 86
7$ are the State-level financial institutions
which play a crucial role in the development of small and medium enterprises in the
concerned States. They provide financial assistance in the form of term loans, direct
subscription to equity/debentures, guarantees, discounting of bills of exchange and seed/
special capital, etc.
 c%9!!  



The Micro, Small and Medium Enterprises Development Act, 2006 has become operational
wef.02-þ0-2006. The main purpose of Act is to examine the factors affecting the promotion and
development of micro, small and medium enterprises. The Act has given powers to review the
policies and programmes of the Central Government in regard to facilitate the promotion and
development and enhancing the competitiveness of such enterprises. The Act has given powers
to board to study the impact of aforesaid policies on such enterprises to have requisite changes in
the policies considering the needs of such enterprises. The board namely National Board for
Micro, Small and Medium Enterprises established under this Act shall have powers to make
recommendations on any matter referred by Central Government relating to the promotion and
development of micro, small and medium enterprises.

4"

The Act has more broader scope than the previous Act namely µThe Interest On Delayed
payments To Small Scale And Ancillary Industrial undertakings Act, þ993 dealing only with
interest payments on late payments by buyer in respect of goods supplied by small scale
industrial undertakings. Now the word small scale undertaking has been substituted by the word
enterprise. As per section 2(e) µenterprise¶ means an industrial undertaking or a business
concern or any other establishment, by whatever name called, engaged in the manufacture or
production of goods, in any manner, pertaining to any industry specified in the First Schedule to
the industries (Development and Regulation) Act, þ95þ (63 of þ95þ) or engaged in providing or
rendering of any service or services. It means that now service industry has come with par with
manufacturing industry. Though the trader section has been excluded under the Act but the
provisions of act are applicable to any company, co-operative society, trust or body, by whatever
name called registered or constituted under any law for the time being in force and engaged in
selling goods produced by micro or small enterprises and rendering services which are provided
by such enterprises. The old ³The Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertaking Act, þ993´ has been repealed.

  

There is a provision in the Act to classify any class or classes of enterprises, whether
proprietorship, Hindu undivided family, association of persons, cooperative society, partnership
firm, company or undertaking, by what ever name called. The enterprises have been classified
separately for manufacturing enterprises and service enterprises as under

A.  ""%! "

pertaining to any industry specified in the first schedule to the Industries( Development
and Regulation) Act þ95þ
(i) Investment in plant and machinery does not exceed Rs.25lacs   

(ii) Investment in plant and machinery is more than Rs.25lacs but

Does not exceed Rs.5crore !  

(iii) Investment in plant and machinery is more than Rs.5crores

But does not exceed Rs.þ0crores !  

B  "" 4""4

(i) Investment in equipment does not exceed Rs.þ0lacs   

(ii) Investment in equipment exceeds Rs.þ0lacs but not exceeding

Rs.2crores !  

(iii) Investment in equipment exceeds Rs.2crores but not exceeding

Rs.5crores !  

Though the formula for calculating the value of investment in plant and machinery for
manufacturing enterprises has been given in the Act but the Act is silent regarding definition
of equipment for service enterprises. So the definition given for manufacturing enterprises
can be used by the service enterprises. The board has the power to recommend to central
government regarding the change in the level of investments in plant and machinery or
equipment in a class or classes of enterprises.



 

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 #
5$ Asper the recent study on
¶Mapping of ESR Practices¶ in five Indian MSME clusters carried out by UNIDO-CDP,
the responsible citizen issues concerning this sector are as under:
 @ Poor Management system ( ad-hoc approach)

@ Environmental Degradation

@ Polluting nature

@ Child labour

@ Low wages to labour community

@ Long working hours

@ Do not follow the minimum standard of labour welfare

@ Working environment

@ Non compliance of regulatory norms

@ Poor Health & safety at work place

@ Lack of skilled manpower

@ Poverty





@ In the broad spectrum,Financial Institutions play a critical role in the society.

@ Through the products and services they provide, financial institutions are uniquely
placed to influence the direction and pace of country¶s economic development and by
default, its long term sustainability.
@ The SMEs owners who are the main drivers for all the issues concerning their
enterprises have a very close financial and day to day needs relationship with these
financial institutions.
@ Indian banks through their widely spread network provide credit, loans and other
services to thousands of Micro, Small and Medium Enterprises and their owners
throughout the country, and, ultimately their managers and loan officers are the
lifeline and the gatekeepers to capital for these SMEs.
@ Indian banks serves the entire nation ranging from top corporate to smallest micro
level enterprise, from the most sought areas to the remotest part of the country. They
touch the most population of the nation in shaping their life by providing them their
products and services.
@ They may have many working problems but their social capital/ relationship with
SMEs is stronger It is in this context that these financial institutions can significantly
influence the economic growth and development of the SME sector and are better
placed in bringing about change.
@ By including social and environmental issues (SE) in their credit appraisal, the banks
can allocate finance in a manner that mitigates the negative impact of SMEs behavior
of skipping social and environmental issues in their businesses. If the financial
institutions are successful in this, they could help to lift SMEs business to a new level
of growth, based on accountability and transparency, and influence SMEs to
responsibly manage the social and environmental issues.
@ Many of the international financial institutions (like International Finance
Corporation (IFC), which is the private sector arm of the World Bank Group) are
mandated to support poverty reduction in member countries through increased
private-sector investments with an eye on minimal social fallout.
@ Credit risk managers, loan officers, managers, policy makers will have to understand
the potential consequences of these strategic risks on their investment value and will
have to include these SE issues in investment process to protect values and facilitate
social responsibility concept in SMEs sector


 ":
 

""

@ With each bank/ FI having separate rating processes and disclosures requirements for
the purpose of disbursing loans, the SMEs were finding themselves spending
significant time, effort and money while approaching different banks/ PIs for their
credit requirements.
@ Considering the above aspect, number of initiatives were taken by FIs and other
related Governmental Organizations such as:
þ. A joint initiated by SIDBI (www.sidbi.in), Dun & Bradstreet Information
Services India Private Limited (D&B) (www.dnb.co.in), Credit Information
Bureau (India) Limited (CIBL) (www.cibil.com) and several leading banks in
the country to form SME Rating Agency of India Limited (SMERA) with the
primary focus on SME segment.
2. A scheme for Performance and Credit Rating Mechanism for SSIs was
formulated by the Government of India in consultation with Indian Banks¶
Association (IBA) and various Rating Agencies. The National Small
Industries Corporation (NSIC) was appointed the nodal agency for
implementation of this scheme. Under the scheme, the NSIC provides subsidy
in the rating fees to the units obtaining credit ratings from the following
agencies which are empanelled by them: Dun & Bradstreet (D&B),
ONICRA, ICRA, CARE9FITCH9CRISIL9SMERA(

@ The basic objective of these initiatives was to provide comprehensive assessment of

the overall condition of SME to reflect its creditworthiness, adjudged in relation to
other SMEs.
@ The other likely benefits of this initiatives were :
þ. Benefits for SMEs:

@ It enables best SMEs to better differentiate themselves among

other SMEs
@ It is a trusted third party opinion
 @ Faster access to funding at appropriate interest rate and other terms
@ Credibility with business partners ± customers, suppliers and
collaborators
@ A tool for self improvement ± gives a comparative benchmark

2. Benefits for Banks/ FIs:

@ Ready available third party opinion

@ Rating report provide relevant information for loan approval
@ Facilitates lending decision ± quantum of loan, price, margin

3. Benefits to SME Sector:

@ Will improve credit inflow, transparency, discipline and best

practices
@ The type of information required from MSMEs for their credit rating and the criteria
adopted for this rating basically looks for factors which assess its creditworthiness
from business, management and financial risks
@ .These rating agencies do not include any assessment tools which measure the social
responsibility behavior of these SMEs.
@ This approach of the rating agencies is contrary to the policy frame work of inclusive
growth of economy which includes all stake holders growth
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#<4

Small Industries Development Bank of India (SIDBI) was established in April þ990 under an Act
of Indian Parliament as the principal financial institution for :

@ Promotion
@ Financing
@ Development of industry in the small scale sector
@ Co-ordinating the functions of other institutions engaged in similar activities

Since its inception, SIDBI has been assisting the entire spectrum of SSI Sector including the tiny,
village and cottage industries through suitable schemes tailored to meet the requirement of
setting up of new projects, expansion, diversification, modernisation and rehabilitation of
existing units.

!4

The Small Scale Industries (SSIs) sector is a vibrant and dynamic sector of the Indian economy.
The sector presently occupies an important place and its contribution in terms of generation of
employment, output and exports is quite significant. The Small Scale Industries sector including
tiny units, comprises the domain of SIDBI's business. Besides, the projects in the services sector
with total cost upto Rs.250 million are also taken within the area of SIDBI's operations. The
Bank also finances industrial infrastructure projects for the development of SSI sector.

%

SIDBI's financial assistance to small scale sector have three major dimensions:

þ. Indirect assistance to primary lending institutions (PLIs);

2. Direct assistance to small units; and
3. Development and Support Services


SIDBI's Schemes of indirect assistance envisages credit to SSIs through a large network of 9þ3
PLIs spread across the country with a branch network of over 65000. The assistance is provided
by way of refinance, bills rediscounting, and resource support in the form of short term
loans/Line of Credit (LoC) in lieu of refinance, etc.



The objective behind SIDBI's direct assistance schemes has been to supplement the efforts of
PLIs by identifying the gaps in the existing credit delivery mechanism for Small Scale Industries.
Direct assistance is provided under several tailor made schemes through SIDBI's 4þ
Regional/Branch offices spread across the country.

4 ! 4

The Bank extends development and support services in the form of loans and grants to different
agencies working for the promotion and development of SSIs and tiny industries. Over the years,
the initiatives of SIDBI under promotional and developmental activities have crystallised into the
following important areas:

@ Enterprise Promotion with emphasis on Rural Industrialisation

@ Human Resource Development to suit the SSI sector needs
@ Technology Upgradation
@ $uality and Environment Management
@ Marketing and Promotion and
@ Information Dissemination


 ! 

/*=- 99%"
@ The banks operating in Orissa have extended Rs 3062.4 crore loan to the Micro, Small
and Medium Enterprises (MSME), housing and automobile sectors during the first eight
months of 2009-þ0.
@ While Rs þ904.66 crore has been advanced to MSMEs, Rs 754.86 crore is housing
finance and Rs 402.87 crore loan has been sanctioned for the automobile sector.
@ However, this loan amount excludes the loans extended to these sectors by private banks
namely Federal Bank, ING Vysya bank, Indus Ind Bank and HDFC Bank, sources said.
@ According to the information compiled by the State Level Bankers¶ Committee (SLBC),
there were 23þ7 sick small scale industries in the state by the end of November 2009,
involving a loan exposure of Rs 252.75 crore.
@ Out of 23þ7 sick SSI units in the state, 223 units were financed during April-November
under µnursing scheme¶. They were sanctioned loans amounting to Rs 2þ.89 crore.
@ Similarly, þ3þ83 automobile loans and þ2,05þ housing loans were sanctioned by the
banks during this period. The flow of credit to these sectors was reviewed in the special
monthly SLBC meeting held recently. It was found that there has been steady flow of
credit to the MSMEs, housing and automobile sectors.
@ On the other hand, the banks were urged to disburse loans under the Pradhanmantri
Employment Guarantee Programme (PMEGP) for cases where the training under
entrepreneurship development programme (EDP) has been conducted, but first
installment hasn¶t been disbursed. The margin money should be claimed within one
month from the date of first disbursement.
 4%"%! 

@ The government today announced a Rs 73-crore scheme for micro, small and medium
enterprises (MSMEs) to provide them design expertise and make their products more
competitive.
@ Under the design scheme, the designers would conduct workshops at cluster level across
the country and prepare a report which would talk about designs deficiencies and
requirement of new designs.
@ The scheme is a part of the National Manufacturing Competitiveness Programme during
the þþth Five-Year Plan.
@ The National Institute of Design (NID) will act as a nodal agency, where it would
undertake on behalf of the MSME Ministry the necessary planning, coordination and
follow-up on the scheme.
@ The programme named "Design Clinic Scheme for Design Expertise" is a combination of
design awareness programmes and project based assistance, which would cover about
200 MSME clusters during the þþth Five-Year Plan.
@ The sector faces competition due to cheap imports and large domestic firms. It is
important that they become more competitive through design innovations so that they can
compete globally, MSME Secretary Dinesh Rai said after inaugurating the scheme here.
@ Of the total scheme budget of Rs 73.58 crore, Rs 49.08 crore will be funded by the
government and the balance amount will be contributed by the beneficiary MSME.
@ Rai said, "The money will be given to a panel which will further sanction the money in
instalments for the projects."
@ The model brings exposure to the doorstep of industry clusters for designs improvement,
analysis, consultancy and offering solutions on real time design problems. This would
help the units in continuous improvement and value addition for the products.
@ NID Director Pradyumna Vyas said, "With the help of this scheme we can compete with
Chinese firms which offer inferior quality products at less prices. With design
innovations, MSMEs would be able to offer quality products at reasonable prices.".
@ The MSME sector employs 42 million people and accounts for 45 per cent of the
country's industrial production and 40 per cent of exports.
  %"-*> ?!! 
@ The government may soon make it mandatory for the state-owned companies to buy at
least 20 per cent of their total purchases from micro and small enterprises.
@ "We are preparing a Cabinet note to encourage the micro and small sector," Secretary in
the Micro, Small and Medium Enterprises Ministry Dinesh Rai told reporters after
inaugurating a Design Clinic Scheme here today.
@ As per the proposal, all public sector companies, including the railways and entities under
the Defence Ministry, would have to procure 20 per cent of their total requirements from
the micro and small sector enterprises (MSEs).
@ Recently, a Committee of Secretaries was set up by the government for arriving at a
consensus on the formulation of the procurement policy.
@ "The Committee of Secretaries, which met on February þþ, has agreed and now there is a
general consensus on it (policy). Now, everybody has agreed for 20 per cent procurement
in three years," the Secretary said.
@ A few government departments have been concerned about the quality standards of
products manufactured by the MSEs.
@ Madhav Lal, Additional Secretary and Development Commissioner, MSME Ministry
said, "We hope that the policy will be in place within the next six months time."
@ Lal said, "The PSUs should have a goal of achieving 20 per cent of their total
procurement from micro and small enterprises in three years."
@ In September 2009, Prime Minister Manmohan Singh had formed a task force on micro,
small and medium enterprises, headed by Principal Secretary T K A Nair, to provide
relief to the sector badly hit by the global slowdown.
@ The MSME task force report, submitted to the Prime Minister recently, recommended
easing credit flow to the sector, formulation of procurement policy, a benign tax regime
and labour reforms.
@ The MSME sector, which contributes 45 per cent to the country's industrial output and 40
per cent to exports, employs 42 million people.
 9
2#'   
@ The Finance Ministry and the Reserve Bank of India (RBI) will issue directions to the
banks to step up credit for micro, small and medium enterprises (MSMEs).
@ A task force formed by Prime Minister Manmohan Singh today discussed steps to
enhance credit to MSMEs, which contribute 45 per cent to the country's industrial
production.
@ "The Finance Ministry and the RBI will soon issue instructions to banks to ease the credit
to the industry," Secretary in the MSME ministry Dinesh Rai said here.
@ The meeting of the group, headed by Prime Minister's Principal Secretary T K A Nair,
also considered ways to infuse venture and equity capital into these units.
@ The MSMEs, which bore the brunt of the economic slowdown have been seeking
concessional credit as also equity infusion.
@ The sector, which employs 4.2 crore people and accounts 40 per cent of India's exports,
has been suffering sickness due to reasons such as shortage of working capital and
technology obsolescence.
@ The task force, constituted in August, also comprises Finance Secretary Ashok Chawla
and Labour Secretary P C Chaturvedi, had formed several expert sub-groups to look into
the specific problems faced by the sector.
@ The group also discussed reports on credit and revival of sick units.
 =*   4!
@ The Reserve Bank of India has directed banks to provide 60 percent of the total loans
extended to MSMEs to micro units.
@ "We want to encourage more and more micro units to come up in the country. Thus, we
have made it mandatory for all banks to provide 60 percent credit, out of the total loans
extended to MSMEs (micro, small and medium enterprises), to micro units," RBI Chief
General Manager Amarendra Sahoo told.
@ Sahoo said that the RBI has also increased the limit of collateral-free loans for MSMEs
from Rs 5 lakh to Rs þ0 lakh. "The base rate module imposed by the RBI will enable an
increase in credit flow to small borrowers at reasonable rates, thus encouraging MSMEs,"
he said.
@ Union Minister of State (Independent Charge) for MSMEs Dinsha Patel said that the
government would extend full support for encouraging such enterprises in the country.
@ "Prime Minister Manmohan Singh has said that the GDP is likely to grow by 8 per cent.
This can be achieved only if more and more small-scale industries, which generate
employment, come up. The government is ready to provide all necessary assistance to
such enterprises," Patel said.





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