A report on the Indian Micro, Small and Medium Enterprises (MSMEs) of Institute of Small Enterprises and Development (ISED) at Kochi in India was released in May 2010. It was found that a strong MSME sector is essential to achieve a growth rate of 8-10 percent in the next decades.
It was estimated that an average growth of 18 percent was observed in the SME sector in the past five years and that there were about 98 percent of the production units in SME sector. For various purposes such as purchase of land, building plant and machinery, and working capital most of the MSMEs in India are dependent on banks. An amount of Rs. 2,56128 crore that constituted for 11.4 percent of the Adjusted Net Bank Credit was provided by all Scheduled Commercial Banks (SCBs) to the MSME sector. A double rate of credit flow was observed from Rs. 1,27,000 crore in 2006-07 to Rs. 2,57,000 crore in 2008-09. The credit flow to the sector was Rs 2, 13,000 crore in 2007-08. There was an increase in the credit flow to Rs. 369866 crore in February 2010.
The Reserve Bank of India set up a working group for reviewing the Credit Guarantee Scheme of the Credit Guarantee Fund Trust for Micro and Small Enterprises. It recommended the increase in provision of collateral free loans from Rs. 5 lakh to Rs. 10Lakh for micro and small enterprises sector. Some other recommendations included absorption of guarantee fees for the collateral free loans by CGTMSE subject to certain conditions, increase in the extent of guarantee cover, simplification of procedure to file claims with CGTMSE and increasing awareness about the scheme, and others. A High Level Task Force was created by the Government of India including recommendations for issues such as taxation, credit, labor, exit policy, skill or technology development, marketing and others.