A nationwide survey initiated by Chennai-based All India Manufacturers Organisation (AIMO) has found that the micro, small and medium enterprises (MSMEs) are struggling to avail the benefits of the MSME credit package announced by finance minister Nirmala Sitharaman as part of the COVID-19 stimulus.
The restrictive eligibility criteria (you have to have a loan transaction with your bank with interest or principal payment due within next 60 days) was found to be a major hurdle for people in a dire need of a loan. The ones who have managed to avail the loan complained that it required too much documentation including audited balance sheet for 2019-20, projection statements, utilisation document, and the bank's preference to disburse the loan amount directly for the outstanding statutory payments like PF, ESI, GST, TDS, salary payments and supplier dues etc. The respondents say it practically leaves nothing with the borrower. There were also complaints of banks disbursing only 10 percent loan, although customers needed 20 per cent of outstanding, the amount assured by the government.
According to K.E. Raghunathan, Former National President of AIMO, the MSMEs who are in need of funds are hesitant to avail the loan facility only to meet non-productive expenses and suffer from servicing of the loan later, as it is not used for the purpose of meeting expenses towards increasing profits such as increasing the order book or investment on assets and machineries. "Fear of uncertainty and insecurity exist in the minds of entrepreneurs," he says.
The modifications the respondents would like to see in the existing scheme include consideration of SMA 2 (where the due date for partial or full payment of principal or interest of existing loan is within the next 61 to 90 days) account holders for the loan eligibility and waiver from interest burdens for loans up to Rs 2 crore as these are largely under micro sector, which is finding it difficult to service it at the moment. They also wanted loans to be disbursed on ad-hoc basis, automatically, without any insistence of documentations.
There were also complaints of delay in processing the loan applications as some of the respondents said they were not getting a yes or no answer for the application under this scheme, even after 15 days of application. While some said scheduled banks are hesitant to process the loans, others accepted that they are extending this scheme mostly for units which have offered collateral security for existing loans and not for those who have taken earlier loans without any collateral security. There is also a reluctance to fund companies in sectors like automobile ancillary, hospitality industry, real estate and service providers like salons, tour operators, taxi owners etc, they noted. Respondents also pointed out that there is no system or method for immediate filing of complaint if a bank denies a loan to MSME applicant at the moment.