Alarmed over mounting dues from the small and medium sector, banks in Andhra Pradesh have asked the government to constitute a recovery mechanism to ensure seamless credit flow to the sector.

According to a report of AP State Level Bankers’ Committee (SLBC), banks in the State were advised to make efforts for a settlement or initiate other recovery measures expeditiously.

The overdue amount under medium and small enterprises sector was Rs 3,948 crore which is 7.10 per cent of total outstanding while non-performing assets (NPAs) stood at 5.73 per cent of the total MSE outstanding portfolio in the State.

In line with the guidelines of the Reserve Bank of India banks were also supposed to adopt a "sympathetic" attitude towards sick enterprises and help in rehabilitation especially in cases where the sickness is on account of circumstances beyond the control of the enterprises.

According to a senior banker, the overdues had also cast a shadow over the performance of banks in implementing the prime minister’s task force recommendation on ensuring proper credit flow to micro, small and medium enterprises in some aspects.

For example, while the recommendation was for a minimum 10 per cent annual growth in the number of micro-enterprises, the actual achievement was only 7.88 per cent. Similarly, it has been recommended that 60 per cent of MSE advances should be to micro enterprises. But by the end of last year, it was only at 38 per cent.

Further, targets under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme were also not met as only over 19,000 units were covered against a target of one lakh units. "The performance under the year under reference is less than the achievement in the earlier year which is a cause of concern,’’ SLBC report said.

Another challenge this year is the state bifurcation from June 2 this year and banks are facing some difficulty in culling out data.

To improve the performance in the present year, SLBC had advised banks to sensitise the managers to extend coverage under the scheme and explore the possibility of opening special branches in SME sectors, among others.

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