Low demand, risk aversion hobble Rs 3 lakh crore MSME rescue
Hindustan Times
Dated: June 10, 2020
The government’s ambitious Rs 3 lakh crore rescue package for
small- and medium-sized businesses is struggling to take off as a host of
issues have hobbled its implementation.
Lenders
awaiting the fineprint of the aid package from Reserve Bank of India (RBI),
continue to be cautious about lending to small businesses due to poor demand
outlook and risk aversion, two people aware of the issues said.
The
size of the package notwithstanding, public sector banks have so far sanctioned
loans worth only Rs 1,109 crore to micro, small and medium enterprises (MSMEs)
in 12 states under the Emergency Credit Line Guarantee Scheme, or ECLGS.
Of
this, Rs 599 crore has already been disbursed to 17,904 accounts, according to
data compiled by the department of financial services.
Uncertain business outlook has made bank finance difficult for many small
businesses, especially in manufacturing.
Despite
the government push, many lenders view micro, small and medium enterprises
utilising the loan moratorium as potential stressed cases with impaired
repayment ability, industry watchers said.
On
May 16, the government announced a comprehensive economic package for the
micro, small and medium enterprises sector, which included the Rs 3 lakh crore
collateral-free automatic loan scheme, Rs 20,000 crore subordinate debt scheme
for stressed micro, small and medium enterprises and Rs 50,000 crore equity
infusion scheme through a fund of funds.
Lenders, however, maintain loan growth will gain momentum gradually.
“There
is traction in the Rs 3-lakh crore loan guarantee programme and MSMEs need some
help with regard to cash flow, which have been constrained because of external
conditions,” said Suresh Khatanhar, deputy managing director, IDBI Bank Ltd.
“It
is taking time because all banks have started just about a week ago and,
depending on the portfolio size and eligibility criteria, we are approaching
small businesses. However, the other two schemes for MSMEs will take time to
pick up as it involves analysing the viability of the business. These other
schemes could also be helpful as many small businesses need capital,” Khatanhar
added.
“The working capital facility is an automatic credit and it should be mandated
by the Reserve Bank to banks that the credit should be extended to micro, small
and medium enterprises without any credit appraisal or evaluation. The credit
should be extended based on a certain percentage of average working capital
facility drawn by banking customers,” said KR Sekar, partner, Deloitte India.
While
government guidelines clearly said that lending institutions are expected to be
liberal in sanctioning loans, they are, however, also “expected to evaluate
credit proposals by using prudent banking judgement and use their business
discretion/due diligence in selecting commercially viable proposals and conduct
the accounts of the borrowers with normal banking prudence.”This
leaves the onus and accountability of sanctioning credit on banks.
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