Arjun Sengupta noted economist in its report had advised that RBI should direct banks to increase flow of funds to micro enterprises at reasonable rates just pushing in more liquidity in the system is not enough. He said there is need of strong norms for end use of bank credit.
The National Commission for Enterprises in the Unorganized Sector (NCEUS) pointed out, "Liquidity in itself will not solve the problem (faced by micro enterprises in getting credit) unless there are directive to banks on the end use of credit, in particular, more credit has to flow in favor of vast informal sector...." .
The NCEUS, headed by noted economist Arjun Sengupta, last week submitted its report on 'The Challenge of Employment in India - an Informal Economy Perspective' submitted said the recent policy measures to undertake the impact of the global meltdown have not been of much help for micro units.
Banks liquidity has witnessed the growth of Rs 45,28,277 crore in November 2008 from Rs 34,67,098 crore in March 2007 after RBI took steps to tackle the crisis.
In spite of lowering of prime lending rate, banks are not passing full benefits to the customers. Loans are given at a minimum of 16 per cent, to the micro and small units which are almost double the rate offered to large industries.
It stated, "There is an urgent need to reorient banking system and its goals in general and credit policy in particular ".
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