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2012-10-31

Banks must be asked to follow RBI norms on MSEs loans: MSME Min

The Ministry of Micro, Small and Medium Enterprises (MSMEs) has requested the Finance Ministry to ask banks to strictly follow the Reserve Bank\'s norm on providing collateral free loans up to Rs 10 lakh to micro and small units.

The Ministry of Micro, Small and Medium Enterprises (MSMEs) has requested the Finance Ministry to ask banks to strictly follow the Reserve Bank's norm on providing collateral free loans up to Rs 10 lakh to micro and small units.

“The ministry has been talking to Department of Financial Services (DFS) to impress upon banks to provide loans without collateral to such units,” Vivek Rae, Secretary, MSME Ministry told reporters on the sidelines of an event organized by CII.

"We had two meetings with the DFS so that the Department can tell banks to follow the guideline for collateral free loans to small units," he added.

The Micro and Small Enterprise (MSE) sector has been complaining that banks insist on collateral for extending loans to them, though banks are aware about the RBI norm.

As per the Reserve Bank guideline, banks are mandated not to accept collateral security in the case of loans up to Rs 10 lakh extended to the MSEs.

Joint Secretary C K Mishra, MSME Ministry said that the ministry would soon have another round of meeting with the department in this regard.

In 2010, the central bank had raised the limit of collateral free loan for MSEs from Rs 5 lakh to Rs 10 lakh.

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