Rs 1000 cr fund to support SMEs

A cabinet note for setting up a fund, with initial corpus of Rs 1,000 crore (Rs 10 billion), to provide credit to businesses in the unorganised sector has been prepared, a senior government official said.

"We have prepared a Cabinet note on NAFUS (National Fund for Unorganised Sector)...," Secretary in the Ministry of Micro, Small and Medium Enterprises Dinesh Rai said  on the sidelines of a CII function.

A high-powered Commission headed by noted economist Arjun Sengupta had recommended setting up the fund, on the pattern of NABARD or SIDBI, to meet the finance and promotional assistance gaps in the development of non-farm unorganised sector.

There are about 5.8 crore (58 million) units in the sector which are facing problems in getting credit from banks and other financial institutions. Rai said it has been proposed to create NAFUS with an initial fund of Rs 1,000 crore.

Last month, Minister of State (Independent Charge) for the Ministry of MSME Dinsha Patel had met the Prime Minister Manmohan Singh to discuss various disadvantages faced by the small and medium business units like lack of access to finance and unfavourable markets.