RBI asks banks to reserve 60 per cent of MSME credit to micro sector

The Reserve Bank of India (RBI) has asked banks to earmark 60 per cent of their total advances to the micro and small enterprises (MSMEs) to micro industries and target a 20 per cent year-on-year growth in MSE credit, in order to ensure enhanced credit flow to the sector.

Banks have to achieve the 60 per cent target in stages, viz, 50 per cent in the year 2010-11, 55 per cent in the year 2011-12 and 60 per cent in the year 2012-13.

The RBI advise to the banks is in line with the recommendations of the Prime Minister's Task Force on Micro, Small and Medium Enterprises headed by T K A Nair.

As per the recommendations of the Prime Minister's Task Force on lending to the micro, small and medium enterprises sector, banks should ensure that:

a) 40 per cent of the total advances to MSE sector goes to micro (manufacturing) enterprises having investment in plant and machinery up to Rs5 lakh and micro (service) enterprises having investment in equipment up to Rs2 lakh; 

(b) 20 per cent of the total advances to MSE sector goes to micro (manufacturing) enterprises with investment in plant and machinery above Rs5 lakh and up to Rs25 lakh, and micro (service) enterprises with investment in equipment above Rs2 lakh and up to Rs10 lakh. (Thus, 60 per cent of MSE advances should go to the micro enterprises).