Modi government's Rs 3 lakh crore SME credit line fails to cheer up the sector

The major crisis that SMEs are facing right now is the lack of liquidity as there was zero sales in the last two months, said Animesh Saxena, President of Federation of Indian Micro and Small & Medium Enterprises.

New Delhi: A special stimulus package and Rs 3 lakh crore collateral free loan facility for the micro, small and medium enterprises have failed to cheer up the MSME sector as they have been facing acute liquidity crisis due to two-month long nationwide lockdown that wiped out their sales. The major crisis that SMEs are facing right now is the lack of liquidity as there was zero sales in the last two months, said Animesh Saxena, President of Federation of Indian Micro and Small & Medium Enterprises.

The problems of the MSME sector have been aggravated as the ministry of home affairs has directed the employers to pay the salaries and wages to workers during the lockdown period. MSMEs employ nearly 12 crore people in the country and crucial for Prime Minister Narendra Modi’s economic revival and employment generation programmes.

“Despite no business in April and May, we need to take care of all the fixed costs such as salary and wages, electricity bills among other things,” Animesh Saxena told ETV Bharat.

“SMEs are not in a position to pay salary and wages due to zero sale in two months.”

Animesh Saxena also points out the problem in the way banks lend to the SME sector.

“A loan is given on the basis your balance sheet, order book and other factors so the banks might deny loans to the SMEs if their order book is not strong or other factors are not very good,” he said.

“There should be very clear guidelines from the government that the banks will not be judgemental in analysing the credit worthyness of SME companies which banks usually do.

Problems in SME collateral free loan guidelines

Animesh Saxena, who has been closely working with the sector also underscores the problem with the guidelines for Rs 3 lakh crore collateral free loans to SME sector.

“In the scheme, the government has put a cap on working capital advances. They have been capped at 20% of the total outstanding amount of a MSME unit as on February 29,” Animesh Saxena told ETV Bharat.

“We have demanded that it should be 20% of the total sanctioned limit of a company and not 20% of the outstanding amount as on a specific date,” he added.

He also says this provision is loaded against those SMEs who have no outstanding loan or small outstanding amount on February 29, as they will not be able to borrow any significant amount.

In an earlier interaction with ETV Bharat, Chandrakant Salunkhe, President of SME Chambers of India also highlighted the problems faced by those SMEs that have no or small outstanding loan amounts before the lockdown.

“All the SMEs do not operate on the borrowed money. The government’s stimulus package will only be beneficial for those SMEs who borrow money,” Chandrakant Salunkhe told ETV Bharat.

Chandrakant Salunkhe also highlighted the perception problem that exists in the banking sector against the MSMEs.

“Bankers view any loan default of SME companies as a willful default which is not true,” Salunkhe had told ETV Bharat.

(Article by Krishnanand Tripathi)