Coronavirus lockdown impact: MSMEs demand more sops

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Published: April 1, 2020 12:30:53 AM

Additionally, the MSMEs said that the uncertain business climate could force some of them to foreclose their loans by selling an asset but the exercise is very expensive as the banks can charge over 5% on the outstanding loan amount.

The government should extend this to all MSMEs, many of which are manpower intensive and employ more than 100 people. The government should extend this to all MSMEs, many of which are manpower intensive and employ more than 100 people. (Representative image)

The micro, small and medium enterprises (MSME) say they would need more extensive support than what has been announced by the central bank and the finance ministry last week to tide over the three-week lock-down in the face of Covid 19 epidemic. These businesses say that lenders should be given clear directions about strictly observing moratorium on interest payment on loans.

Some businesses told FE that there is a possibility that some of the lending institutions may debit the EMIs from workers’ accounts through electronic clearing systems (ECS) or auto-debit facilities.

Further, while the finance minister announced that government will bear the EPFO contribution on behalf of employees as well as employers, the government restricted the benefit to firms with less than 100 employees and with majority of those earning below Rs 15,000 per month.

This, the another business said, was excluding many establishments, especially the small service providers in the IT industry which usually pays higher salary than other smaller companies.

“The government should extend this to all MSMEs, many of which are manpower intensive and employ more than 100 people. The scheme should also benefit all employees up to Rs 25,000 remuneration as many small service providers pay higher salaries,” Rajiv Chawla, chairman of integrated association of MSMEs of India said.

Additionally, the MSMEs said that the uncertain business climate could force some of them to foreclose their loans by selling an asset but the exercise is very expensive as the banks can charge over 5% on the outstanding loan amount.

RBI should issue firm guidelines to all banks and NBFCs not to charge foreclosure charges from MSMEs who wish to prepay or even switch banks for better limits or extra credit, a small business owner said.

Additionally, some MSMEs have also urged the state governments to direct their power utilities to waive off fixed charge for at least three months, and provide additional time industrial and commercial customers to pay electricity bills without levy of hefty surcharge of interest, penalties and fine.

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