In a move to help the unorganised or the traditional sector face competition from their deep-pocketed counterparts, the Government of India has planned to set up a dedicated national fund to offer cheaper credit to micro and small entrepreneurs. The proposal comes after ICRIER’s recommendation for offering cheaper credit to mom-and-pop stores.
According to an official release, smaller amounts like Rs 20,000 will also be disbursed from the fund; the interest rate will be two per cent points lower than the prevailing market rates.
“A cabinet note for a separate dedicated fund for extending credit to people, ranging from shopkeepers to hawkers, in the unorganised sector has been moved by the Ministry of Micro, Small and Medium Enterprises (MSME),” an official said. The government aims to provide loans to over 50 million people in the small and unorganised sector through this fund.
Besides, the MSME has also written to the finance ministry and the RBI urging them to exempt small businesses from the requirement of personal guarantee. The apex bank has been urged to do away with the mandatory demand for collateral in case of loans up to Rs 25 lakh. As of now, banks provide loans without collateral only in the case of loans, which are not higher than five lakh rupees.