India's smallest firms hunger for credit

The argument of the article here is that the small and medium enterprises are not getting the required credit for them to scale up and increase their operations. The writer says that the government banks have reluctance to provide credit to small and medium enterprises as they find them too risky. This leads to other financial companies charging interest rates of almost 20%. The loan value is also reduced to about 30% of the collateral value. This, the writes feels, causes the SMEs to be slow in progressing and being a bottleneck to larger corporations which use them as suppliers. The government's move to cut interest rates by 25 basis points does not provide any relief to these sectors that have interest rates around 20%. The argument however lacks 1 point. why does the government banks feel this to be risky if the collateral is provided. How is the credit return and the statistics on the defaulters. Perhaps a high number of defaulter could be the reason for the risky feeling.

vocabulary
collateral - security given for a loan, additional, of a side line (cousin is a collateral relative)
discerning - perceive by vision, (perceive a ship in the horizon), judge or discriminate or distinguish (discerning the good from the bad)