New Delhi: Banks not fulfilling MSME lending targets should be penalised, Ministry of Micro, Small and Medium Enterprises Secretary Vivek Rae has said.
Small units face challenges such as lack of access to finance, non-availability of collaterals and delayed realisation of receivables. There are over 26 million MSMEs in the country providing employment to around 60 million people.
"These units face financial exclusion from the banking system as lending targets for MSMEs, set by the RBI, are not being met by banks.
"Also, there is no mechanism to enforce the compliance with these targets. There is lack of accountability on part of banking system to achieve them," Rae said.
If banks don't deliver, there must be some sanctions on them and banks must be held accountable for not meeting the targets, he added.
As per the Reserve Bank of India norms, banks must achieve a 20 percent year-on-year growth in credit to micro and small enterprises and a 10 percent annual growth in the number of micro enterprise accounts.
Rae said there is only lip service being paid by the banking sector as there is "financial exclusion" and no financial inclusion in the MSME sector.