31 May, 2008
Hon’ble Union Finance Minister releases the
Code of Bank’s Commitment to Micro and Small Enterprises
Shri P. Chidambaram, Hon’ble Finance Minister today
released the “Code of Bank’s Commitment to Micro and Small Enterprises”
brought out by the Banking Codes and Standards Board of India (BCSBI) in
collaboration with the Indian Banks’ Association (IBA) at a function held in
the Reserve Bank of India, Mumbai.
The Finance Minister stated that Micro and Small Enterprises
play an important role in India’s economy. For many years they have been in
the clutches of the moneylenders who charged them usurious rates of interest. It
is important that banks extend credit to this sector and nurture them as they
provide employment to the less educated and less trained. He hoped that banks
will stand by the commitment the have made in the Code for Micro and Small
Enterprises facilitating access to institutional finance for MSEs not only in
normal times but also in times of financial difficulties.
The BCSBI is a collaborative effort between the RBI and the
banking industry with the objective of promoting good banking practices by
setting minimum standards, increasing transparency, achieving higher operating
standards and above all, promoting cordial banker-customer relationship which
would foster confidence of the common man in the banking system. In keeping with
this objective, the Code of Bank’s Commitment to MSEs has been evolved as this
is the lower segment of the industrial and services sector in rural and urban
areas which is unable to reap the benefits of Government schemes because of
their inability to access bank finance. The Code reflects the positive
commitment of banks to their Micro and Small Enterprise (MSE) customers to
provide easy, speedy and transparent access to banking services in their day to
day operations and in times of financial difficulties. The Code is not only a
Charter of Rights of the MSEs, but also enshrines their obligations vis-à-vis
Some of the important commitments are:
Making available, free of cost, a copy of the Code to
all MSE customers and a standardized loan application form with a check
list indicating all that is required to be submitted with the application.
Setting categorical time frames for disposal of credit
application, disbursal of loan sanctioned, effecting pledges/deliveries,
increasing drawing power, assessing viability and working out a
rehabilitation package, etc.
Providing information about interest rates, fees and
charges upfront so that the MSE can make a meaningful comparison with
those of other banks and take an informed decision.
Placing the banks policy relating to MSEs in public
Endeavouring to provide facilities to a Single Window
Mechanism and Credit Counselling services.
These and several other commitments made voluntarily by banks
and incorporated in the Code, are expected to help both banks and MSEs to fully
exploit their potential.