SLBC moots 'risk fund' from AP govt for SMEs

It has come up with 11 other suggestions for providing relief to the crucial sectora

Action plan

• Banks should open more branches in MSME clusters
• More finance to the sector under CGTMSE
• Govt, Industries Dept should solve power problem
• New guidelines on revival of sick units are required

Hyderabad: State Level Bankers’ Committee (SLBC) of Andhra Pradesh, which recently organised Special Steering Committee meeting on SME sector, has underlined the need for the AP government to set up a risk fund for the benefit of small and medium enterprises (SMEs) in the State.

The meeting, which was held in the last week of October following representations from the industry bodies led by FSME-AP, also came up with 11 other ‘action points’ for providing relief to the crucial sector which slipped into crisis in recent years.

“Government may examine the creation of risk fund for SME units as a part of relief measures. AP Government and Industries Department should also look into the issues on power and resolve the same,” the meeting suggested.

It also undescored the need to increase coverage of SME sector under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). “All banks should strive to achieve the set targets under the SME lending and coverage of units under CGTMSE,” it added. The meeting, which also called for sensitization of SMEs on the scheme through various campaigns at the district level, suggested that District Industries Centre (DIC) and other stakeholders including industry associations should be involved in such campaigns.

Dr Rajat Kumar, Commissioner of Industries, said in the meeting that industrial sector was facing myriad problems such as power crisis, interest burden due to bank loans, increasing tariffs, shortage of manpower and political disturbances. He urged all the banks to extend their support to the SME sector in the State.

S V Hanumantha Rao, Officer on Special Duty, Finance Department, AP Government, stressed the need for changing mindset of branch managers. “The main reason for very slow progress under SME sector appears to be knowledge gap at the field level. Focused trainings need to be given to the branch managers in this direction,” he said. The bank managers should suggest some remedial measures before industrial units turn non-peforming assets (NPAs) or become sick, he added.

K V Kannan, General Manager, Andhra Bank, suggested that industrialists should approach the banks at least 90 days before an account could turn NPA. This way, “90 days time is available for the bank to restructure the account,” he explained. “However, in majority of the cases, the beneficiaries are approaching the banks after inordinate delay without leaving sufficient time for the banks to take a proper decision in this regard,” he pointed out.

Meanwhile, industry bodies, while explaining problems faced by SMEs in AP, blamed power crisis and political disturbances for the sorry state of affairs in the industrial sector. Stating that AP has seven lakh SMEs that provide employmenet to 40 people, A P K Reddy, President, Federation of Small and Medium Enterprises of Andhra Pradesh (FSME-AP), said that no industrialist was coming forward to set up new SMEs in AP. “Even existing units are not utilising 50 per cent of their production capacities on account of acute power crisis,” he reasoned.