Date:03/01/2009 URL: http://www.thehindu.com/2009/01/03/stories/2009010354340500.htm

Karnataka - Bangalore

Increase credit flow to SMEs, banks urged

Special Correspondent

Bangalore: A special meeting of the State Level Bankers’ Committee (SLBC) met here on Friday to discuss the problems faced by small and medium enterprises (SME) in the context of the economic slowdown.

The meeting was chaired by George Joseph, Chairman and Managing Director, Syndicate Bank.

Additional Chief Secretary and Development Commissioner Shanthakumari Sundar headed the State Government’s representation at the meeting.

Referring to the economic slowdown, Mr. Joseph said although inflation was being brought under control, “an upturn is unlikely before the end of 2009.”

“There may be a semblance of normality by the first quarter of 2009-10,” he added.

“The impact is likely to be felt “by all sectors of the Indian economy,” he said. “The SMEs are reeling under pressure and it is time for banks to come to their rescue,” he remarked.

B. Srinivas, Regional Director, Reserve Bank of India, warned that the crisis could engulf the banks if “corrective steps” were not taken. The recent measures announced by the RBI were aimed at providing relief to small units by easing access to bank credit.

He pointed out that the special refinance facility operated by the Small Industries Development Bank of India (SIDBI), with funds to the tune of Rs. 2,500 crore, was aimed towards meeting this objective.

Ms. Sundar said the “main impact of the slowdown has fallen on the small units.” She said the Government was setting up another Industrial Facilitation Council which would deal with defaults by units to banks in Karnataka.

Arvind Burji, Secretary, Karnataka Small Scale Industries Association (KASSIA), demanded that a “tax holiday” be declared for SMEs.

J. Crasta, senior vice-president, Federation of Karnataka Chambers of Commerce and Industry, said: “What we have seen so far is nothing, worse is still to come.”

T. Ramappa, secretary-general, Bangalore Chambers of Commerce and Industry (BCIC), said more attention should be paid to the “linkages” that small enterprises have with larger corporate entities.