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MSME body warns of crisis on credit flow dips

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CIOL Bureau
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MUMBAI, INDIA: The MSME sector has warned that if banks continue to hold back funds and keep raising interest rates, the already-struggling sector will be facing more problems including more defaults, according to a PTI report.

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“From the demand side, the rising interest rates would mean a reduction in the number of SMEs taking loans or reducing their bank loan amount. This will have a huge impact on output and growth of this sector,” SME Chamber president Chandrakant Salunkhe warned.

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After the first quarter monetary policy on July 26, leading bankers told the Reserve Bank that they were already witnessing stressed assets from the MSME sector and warned that it would only go up in the coming quarters.

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Salunkhe further said the industry was expecting only around 14 per cent growth in credit flow to the sector this fiscal. Last fiscal, the credit offtake by the MSME sector grew 17 per cent to Rs 4,27,950 crore.

“For the current fiscal, we see fund flow slowing down further from last year to around 14 per cent to Rs 5,13,550 crore,” Salunkhe said.

With the apex bank increasing the interest rates, banks are likely to hike their lending rates and pass it on to the customers, rendering a heavy impact on MSME sector, which is extremely sensitive to hike in interest rates, he said.