The Small and Medium Enterprises (SMEs) sector is poised to absorb substantial bank credit in the future. But there are certain challenges like absence of credit information systems, inadequacy of the collateral, higher cost of follow-up, etc. Banks should consider channel financing as a viable option.

The role of Small and Medium Enterprises (SMEs) in economic growth, employment generation and poverty reduction has been over emphasized. The SME sector contributes approximately 40% of the industrial production and 45% of industrial employment and 50% of total exports. The Tenth Five Year Plan placed much emphasis on SMEs for attaining a target of 8% growth per annum in GDP and to bring down the poverty ratio to 11% over the next decade.

SSIs: Small Scale Industries (SSIs) are defined as units having investment cost on plant and machinery not exceeding Rs. 1 cr in respect of all industries and upto Rs. 5 cr in respect of select hosiery, hand tool, pharmaceutical, stationery and sports goods industries. Similarly, tiny units are defined as those having investment cost on plant and machinery not exceeding Rs. 25 lakh. Medium Enterprises: Medium Enterprises (MEs) are defined as those units with investment cost on plant and machinery above the small scale industry limit mentioned above and upto Rs. 10 cr.

Professional Banker Magazine, Small and Medium Enterprises, SMEs, Small Scale Industries, SSIs, National Common Minimum Program, NCMP, SME Enterprises Rating Agency, SMERA, Micro Finance Institutions, MFIs, Reserve Bank of India, Risk Management, P Chidambaram, Central Vigilance Commission, Gross Domestic Products, GDP.