The Federation of Indian Export Organisations (FIEO), on Monday, said that the RBI’s latest data on the decline in non-food credit by banks to 9.7 per cent during the first half of the current fiscal vis-À-vis 29.1 per cent in the corresponding period last year was only part of the picture as overall fund flow against the previous year was constant.
In a statement issued here the FIEO President, Mr A. Saktivel, contended that while corporates had mopped up Rs 41,065 crore from the initial public offerings and qualified institutional placements – nearly 20 times the previous year – the MSME (Micro, Small & Medium Enterprises) export sector had to bear the brunt of recession due to lack of demand, stimulus and higher cost of credit from banks.
The bulk of MSMEs rely mostly on bank credit for meeting their working capital requirements.
Further, companies and banks are earning 3.5 to 4 per cent while parking funds with mutual fund companies, which in turn are lending to companies with a mark-up of 50 to 100 basis profit. The cost advantage to large corporates is between 250 to 300 basis points vis-À-vis the MSMEs who depend on bank credit exclusively.
The FIEO chief explained that as the Government is reviewing the situation at present the time may be ripe to consider a ‘low cost credit window’ in the current global scenario for the labour-intensive MSME export sector for their sustenance.
Source : Business Line