Govt gives prime priority for the development of SME sector

Banks and other financial institutions have a very important role in assisting the development of the small and medium enterprise (SME) sector but advances made to the sector "is seen not encouraging", Kerala industries minister Elamaram Kareem said today.

"It is noticed that even though the banks have sufficient funds available, the advances made to this sector is seen not encouraging."

The percentage of growth in the advances which was at 28.50% in the year 2005 has come down to 9.07% in 2009, indicating that the banks are reluctant to provide adequate finance to SMEs, he said.

Kareem said about 40% of the deposits received from Kerala was not being utilised by the banks for providing the required advances for the small and micro enterprises, which provide direct employment to over 25 lakh people inKerala with a total turnover of about Rs20,000 crore.

Kareem said banks are dealing with public funds and these are to be utilised with respect to the Central and state governments' policies for supporting the needy sectors.

Kerala government was giving prime priority for the development of the small and medium enterprise sector in the state, he said.

He was speaking at an interactive session of the representatives of the banks and other financial institutions here.

"It is noticed that the banks are not even achieving the targets fixed against this policies and also levying higher and unaffordable rates of interest which in turn makes the enterprise unviable and sick', the minister said.

Financial institutions, which are formed for the benefit of industry and public at large, should not forget its social commitments.

Even though the Prime Lending Rate (PLR) fixed by Reserve Bank of India is 11 to 12%, most of the banks are charging either at the upper limit of the PLR or even 4 to 6% above PLR rates for advances to SME sector, he said.

Kareem said as far as Kerala was concerned, the SME sector was one of the most important sectors which require more support from the Government, fnancial institutions and other promotional agencies.