Speaking at the one-day conference on 'Learning from recession, saving an economy: Towards an MSME agenda', Usha Thorat, deputy governor, RBI, asked the banks to review their credit policy towards micro, small and medium enterprises (MSMEs).

Acknowledging the importance of sector, she said, "About 12.8 million MSMEs provide jobs to over 300 million people and account for 39 per cent of the manufacturing sector output and 33 per cent of exports."

Thorat reasoned that MSMEs have been badly hit by economic downturn. "MSMEs are facing a slump in demand for exports and services, besides a build-up of large inventory, delayed payments and slowdown in remittances, "she added.

She also pointed that MSMEs are the "worst sufferers" when a disaster strikes. Hence, these sectors must be provided relief on the lines of the National Equity Fund as recommended by the Chakraborty committee.

Indicating the government initiatives towards the same, Usha said, "RBI had taken 'unprecedented' measures to ensure liquidity and credit flow to MSMEs to help the sector during the recessionary period now and added that a special refinance facility under Section 17 (3B) was also extended to them."

Thorat also indicated that the regulator has granted in-principle approval for setting up to four credit information agencies to ensure better credit disbursal and monitoring.

"One has to be sensitive to the sector and put in a revised policy," she added.

As per RBI guidelines, it is mandatory for domestic commercial banks (public and private sector) to provide 40 percent of Adjusted Net Bank Credit (ANBC) to priority sector, which includes agriculture and micro, small and medium enterprises. In a recent finding, revealed that major banks failed in achieving agri-advance targets until November 2009. The list includes major banks - Bank of Baroda, Oriental Bank of Commerce, United Bank of India, Corporation Bank, Union Bank, Punjab & Sind Bank and Syndicate Bank.

Usha Thorat is the chairperson of high level committee to review Lead Bank Scheme (LBS) appointed by RBI. The committee has laced its recommendations to help in organizing the overall credit/lending structure and improve credit flow to priority sectors.