It is disconcerting that the new year, according to the Hindu calendar, has begun on a crisis note for the small and medium industries. The SME sector is the backbone of the economy, accounting for 30 per cent of the GDP, employing around 11 crore people through a little over 6 crore units.

Their main source of funds are the non-banking finance companies (NBFCs) that provided for 12-15 per cent of the total credit generated in the last two years.

Most NBFCs are facing a drought-like situation as far as funding is concerned. In fact the sparing witnessed recently between the government and the Reserve Bank of India was over the need for banks to release more funds to NBFCs.

There are about 11,000 NBFCs operating in the country and the play a major role in lending to millions at the bottom of the pyramid, those who rarely get loans as they cannot afford the collateral.

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