SL banks start priority sector lending for MSMEs
View(s):Sri Lankan banks are to start directed lending to priority sectors in Micro, Small and Medium Enterprises according to a new direction by the Central Bank (CB).
The CB, in a circular, said it has brought Micro, Small and Medium Enterprises (MSME) under the priority sector category of the licensed banks directing more credit flow towards individuals and businesses engaged in such ventures.
The Monetary Board has taken this decision having recognised the need to promote economic sectors with high potential in terms of domestic economic growth and export earnings, leading to the broad-based revival of the economy.
Priority sector lending targets have been introduced on credit granted by licensed commercial banks and licensed specialised banks to MSME sector, the circular issued by the CB.
Accordingly, licensed banks shall grant credit to individuals and businesses in lending to target MSME sector and ensure a growth rate of not less than 20 per cent per annum on Y-o-Y basis, over the outstanding stock of lending to MSMEs at the end of the previous year.
The lending target will be prioritised in 14 economic sub-sectors that display higher potential in terms of domestic growth and export earnings within the broader MSME sector, the circular clarified, adding that it shall not be restricted to the said sectors. Credit facilities shall include term loans, leasing, overdraft and trade finance facilities and it will be granted to enterprises with an annual turnover not less than Rs.1000 million, the CB order stipulated.
The following 14 economic sub-sectors are eligible for this facility:
- Food and beverage processing
- Production of medical utilities and related products
- Development of distance learning facilities
- Domestic cottage industry
- Rubber and rubber products
- Ship and boat building
- Cosmetics
- Batik and handloom
- Gem and jewellery
- Health and wellness
- Electronics and electrical components
- Motor vehicle assembly
- Pharmaceutical manufacturing
- Porcelain, ceramics, and pottery