(MENAFN- KNN India) When the Government is pulling all stops to upscale the domestic manufacturing sector to a Lion in the global market through the 'Make in India' vision of Prime Minister Narendra Modi, the Banks are in a 'could not care less' mode.
The latest data made available by RBI shows that the average interest charged by the banks from the manufacturing and processing sector is same, about 12 per cent, as charged from the Trade, Transport, Personal loan and other services € treating manufacturing 'at par'.
Manufacturing has a crucial role in overall development of any economy. Manufacturing not only enhances availability of value added products in the market, but also has a multiplier effect in employment creation and distribution of income.
While contribution of manufacturing in all development economies is significant, in India the share of manufacturing to the GDP is stagnating at 15 per cent. The objective of 'Make in India' is to take it to 25 per cent. The task is not easy. It takes a lot of supports and services to set up a brick and mortar factory.
To facilitate growth of manufacturing, Government of India has formed a high level group to ease Doing Business in India and prescribed a timeline for states to drastically curtail the cost and time for various regulatory clearances required by an industry to start and operate. However, all these initiatives will remain ineffective if the cost of funds remain high and availability inadequate.
A little more analysis of the RBI data provides more revealing information. Every manufacturer will yearn to get his bank loan at 10-11 per cent interest rate. However, while only 15 per cent of the total credits to the manufacturing sector were provided at this rate, nearly 23 per cent of the total credit to the trade sector was available at the same rate.
The situation is no different at the interest slab of 12-13 per cent, the average rate of bank interest as per RBI data. While only 23 per cent of the loan to the manufacturing sector was provided at this rate, for trade 27 per cent of the total Bank advance got the same treatment. The situation is no different if we go to the higher interest brackets at which doing business become more difficult. The share of manufacturing loan paying more interest is always more that the trade loans.
Industry body Federation of Indian Micro & Small and Medium Enterprises (FISME) has repeatedly taken up the issue of this step motherly treatment to the manufacturing sector by the banks with the policy makers and is planning to take them up further at a national level symposium.
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