As credit flow to the micro and small enterprises (MSEs) has not yet been made smooth, Punjab National Bank (PNB) has extended a helping hand to these enterprises so as to improve their liquidity conditions.
Chairman and Managing Director, PNB, KC Chakrabarty said that the bank has arranged a meeting of the State Level Bankers' Committee (SLBC), Haryana, in order to check the difficulties faced by the MSEs.
PNB has recorded a growth of 25% in its credit to MSEs between September 2007 and September 2008. "However the recovery of loans from the MSE sector has declined by 6% in the same period. We have seen a rise of 22% in advances to the agriculture sector this year and our overall growth stands at 39%," said Chakarbarty.
Meanwhile Chakrabarty also pointed out that, "Though the bank's credit grew by Rs 15,000 crore between September 2008 and December 2008, since other banks are also lending aggressively our overall growth rate may fall by the end of the fiscal year."
Although the conditions prevailing in MSEs demand a cut in the interest rates as well as banking charges but the high cost of deposits would not allow the bank to resort to an immediate cut, said Chakrabarty. "If the inflation falls to the level of 4%-4.5% and the returns on deposits increase by 2%-2.5%, we may think of reducing the interest rate," he added.
During the period between September 2007 and September 2008, the MSEs in Haryana have reported a growth of 42.87% against 29.16% growth during the same period in the last year. As on September 2008, credit to the MSEs increased to Rs 6,828 as compared to Rs 4,779 crore as on September 30th, 2007.
The total advances of PNB between September 2007 and September 2008 increased by 32.98% to Rs 51,869 crore.
The CMD further informed that now the PSU banks would also extend ad-hoc working capital demand loans up to 20% of the existing fund-based limits. This credit will be granted to units that have an overall fund-based credit facility up to Rs 10 crore. The repayment such loans will be one year and further there will also be a facility of deferring the repayment for six months. However interest would need to be paid during these six months.
Banks will also restructure SME loan accounts for the second time but on an individual basis. Repayment will be rescheduled within overall loan policy of the respective banks if the units are not able to make the timely repayment of the loan.