BENGALURU: It’s only the beginning of tough times for Micro, medium and Small Enterprises (MSMEs), a segment which has been severely hit by the slowdown in business post demonetisation. With sales having gone down, many have been, and still are, unable to repay loans to banks and risk being categorised as non-performing assets (NPA).
If an enterprise is unable to pay the loan dues for 90 days, it can be categorised as NPA, inviting penalty.
The reason is simple. There has been an overall slump in business for MSMEs since November 8. While one aspect of the problem they’re facing is the lack of hard cash to pay wages, the other side is that there are fewer orders and hence prodution production has taken a hit.
Speaking to Express, R Krishna Murthy, President of Peenya Industries Association said MSMEs were not getting help from anyone. “Some of the units have shut down. But even though the number of those that have shut down is few, most of them are struggling to stay operational. I have been requesting bank representatives to increase the 90 day limit to 120. But we are not getting help from anyone.”
Further, even though the government had instructed banks to ensure supply of money in industrial areas, there is no money in any of the banks, he added.
Bank officials, on their part, said they were in a tough spot when it came to loan disbursements. Being unable to repay a loan for 90 days was just a small part of the problem, but the bigger issue for banks is to keep the loan process afloat in this time of crisis, an official from Gramin Bank, Kerala, told Express. “The bigger issue here beyond penalties is how banks will manage to keep loan disbursement viable. It becomes difficult for banks to disburse loans with delayed repayment. Banks need some assurance for loan repayment,” the official stated.
This being the case, it could take several months for MSMEs to stabilise their businesses again. Across the country, MSMEs have seen a slowdown in sales and in turn, production. It could take one more quarter, or even two, for businesses to stabilise, according to Madhusudhan Khambete, President, Thane Small Scale Industries Association (TSSIA).
Entrepreneurs have also observed that purchasing had stopped as a lot of black money was used for these orders, resulting in lower production. Credit co-operative societies, catering to financial difficulties of labourers have also suffered a blow, as many of them were running on funds from politicians.
Bengaluru-based Prathibha R, garment workers representative, said several garment factories were giving leaves to workers as there was no work. What’s worse, these will be calculated against their compensatory offs.