MSMEs bear the brunt of rising NPAs

LUDHIANA: The state and the Central government claim that the Ministry of Micro, Small and Medium Enterprises, (MSMEs), has asked banks to relax the conditions and loans to be made easily available for new units or further expansion, but as far as MSMEs are concerned, they say that a tedious process is involved to get loans sanctioned from banks and without any security deposits, banks were not eager to provide loans.

Shivani Bhakoo

Tribune News Service

Ludhiana, December 12

The state and the Central government claim that the Ministry of Micro, Small and Medium Enterprises, (MSMEs), has asked banks to relax the conditions and loans to be made easily available for new units or further expansion, but as far as MSMEs are concerned, they say that a tedious process is involved to get loans sanctioned from banks and without any security deposits, banks were not eager to provide loans.

Ajit Lakra from Superfine Industries here said banks had rather ensured more strictness now. They observe the balance sheets, performance of the units, etc, very minutely so that they do not turn into NPAs. “In a way, it is good on the part of banks to ensure strict vigil. In connivance with the bank staff, huge loans were sanctioned and later firms were declared as NPAs causing losses to the tune of crores to banks. Now, before sanctioning loans, everything is thoroughly checked by the banks”, said Lakra.

The president of Federation of Punjab Small Industries Association (FOPSIA) Badish Jindal said after NPAs, the banks had become too strict with the MSMEs. No loans were offered without collateral and as compared to large units, the interest rates on loans for small and medium units was much higher. He said medium and small enterprises had to pay up to 14-15 per cent interest amount, while large scale enterprises were paying up to 7-8 per cent interest.

He added that the MSME was becoming a scapegoat of NPA crises of banks.

The banks are now strict in issuing loans to the MSMEs. Even after the CGTSME scheme, which allows the MSMEs to get collateral free loans up to 2 crores, the banks are not extending any such support to the MSMEs. The rate of interest is very high in India, which is one of the causes of rising NPAs. Banks are charging high annual and monthly expenses on loans.

Regular meetings to redress delayed payments of MSMEs

Ludhiana: High hopes are being generated by the MSMEs here as the government has appointed almost all the members of the MSME Tribunal Committee for the recovery of delayed payments. Though, few meetings of the committee have already been held under the chairmanship of the Deputy Commissioner, still members feel that it takes much time for both the parties to settle the disputes.

GM District Industries Centre (DIC) Mahesh Khanna, talking to The Tribune, said a total of around 201 cases had been received by the committee. In last few meetings, parties were called for reconciliation. “It takes time to listen to their grievances, the reasons why payments are delayed and the counseling process. Of a total of 201 cases received till date, we are able to settle approximately 35 cases, others are pending and are in process,” said Khanna.

The government has recently appointed Naveen Sood from Ludhiana to represent the industry. The other members of the Tribunal Committee include chairman Deputy Commissioner, one advocate, GM Industries here, lead bank manager. The aim of constituting this committee is to help MSMEs settle their disputes. If the cases are introduced in courts, it will take them years to settle.

The president FOPSIA Badish Jindal said, “There remains bleak chances to get back money as cases are moved in various courts. This kind of committee summons both the parties, counsels them and tries to find a solution acceptable to both the parties and then payments are released. But, this would be helpful if meetings are conducted on a regular basis,” said Jindal.