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MSMEs fear bank harassment, appeal to RBI for easing of credit rules

MSMEs say the situation will get worse if the government fails to intervene and boost industrial activities

MSMEs are among the worst-affected sectors from the pandemic-triggered economic downturn MSMEs are among the worst-affected sectors from the pandemic-triggered economic downturn

Key Highlights

  • MSMEs have urged RBI to order banks to spare struggling firms from submitting monthly stock statement and debtors' list
  • MSMEs fear banks will cut cash credit limit as they are left with less stocks
  • MSMEs have been badly hit due to coronavirus-triggered economic downturn
  • Industry body FISME says industrial activity data for August-September will be lower

Left with little stock after executing past orders and meeting pent-up demand, micro, small and medium enterprises (MSMEs) fear banks will cut their cash credit limit aggravating financial trouble.

Worried firms want banks to suspend the formula for determining their drawing power (DP) limit and allow them to continue to avail credit facility. Some of them have pleaded RBI to order banks to spare struggling firms from submitting monthly stock statement and debtors' list.

Many MSMEs have seen fresh orders dwindling and plant utilisation falling after briefly climbing in May-July period following the gradual unlocking of economic activities.

Speaking to BusinessToday.In from Surat, Prashant Patel who runs two chemical factories in the coastal state of Gujarat said that his plants were running at 5-10% of its total capacity, dipping from 100% in May-June level.

Patel, Director of Prashant Industries, claimed that the problem was across the industry although it varied from one another. He noted that the situation would worsen should the government fail to intervene and boost industrial activities.

SME Chamber of India Founder and President Chandrakant Salunkhe said he had urged RBI to extend moratorium upto March 31, and allow MSMEs to not submit stock statements and debtors' list till the end of current fiscal.

"Banks should not reduce drawing power during this period. RBI should give standing instruction to banks to not harass MSMEs and do restructuring without affecting their credibility and CIBIL score," Salunkhe said.

MSMEs are among the worst-affected sectors from the pandemic-triggered economic downturn, and majority of them are struggling to survive. The government has provided Rs 3 lakh crore concessional credit to the industry but most of the firms complain that it is not sufficient.

Concurring with Salunkhe, Federation of Indian Micro and Small & Medium Enterprises (FISME) President Animesh Saxena said that the industry had been busy executing past orders and meeting pent-up demand after lockdown was lifted, but in absence of fresh orders it is grappling with numerous challenges.

Representing 740 MSME associations across the country, FISME chief will also take up the issue of stock statement with the government and RBI.

"Most of the people have same issue. The previous orders and pent-up demand they had have been satisfied. New demands are not there. The industrial activity data for August-September would be lower and reflect the current situation," Saxena said.

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