FISME writes to RBI’s Shaktikanta Das; suggests funding cash losses, suspending SMA norms, others for MSMEs

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May 27, 2021 4:26 PM

FISME also suggested sanctioning term loans to firms whose capital expenditure may have got stuck midway, suspending bank loan ratings by external credit rating agencies until normalcy returns, making available ECLGS 3.0 to more and more firms, etc.

20 per cent of such free programmes are conducted exclusively for weaker sections of the society. (Representative image)

MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME) has suggested multiple credit relief measures to the Reserve Bank of India (RBI) to help MSMEs tide over the crisis precipitated by the first and second waves of the Covid pandemic. “It is our humble prayer to RBI and the GoI, not to let an MSME close down until all efforts to save it have failed. The alternative is scary. Along with tens and thousands of these small establishments, lacs of workers will come on the road, increasing human misery manyfold,” FISME President Animesh Saxena said in a letter to RBI Governor Shaktikanta Das recently.

Among the suggestions shared with Das included “funding cash losses incurred by MSME borrowers due to the extraneous circumstances, giving due weightage to the vintage of the firm and treating this period of last three years as exception forgiving default, bearing the cost of payrolls and/or social security, suspending SMA norms & the practices of assigning NPAs based on straight-jacketed excel sheet based automated systems for the covid period, doubling financial powers at all levels and bank managers encouraged to exercise discretion on a case to case basis, and deferring payment of installments under ECLGS.

SMAs are special mention accounts signaling incipient stress leading to the borrower defaulting in servicing the debt. SMA-0 are accounts with payments partially or wholly overdue for 1-30 days while SMA-1 and SMA-2 accounts have payments overdue for 31-60 days and 61-90 days respectively.

“Recovery under ECLGS will be starting now after a year of the moratorium but amid the second wave of Covid, MSMEs haven’t recovered and are not in a position for repayment. The government should extend this by another year. Also, MSMEs, which have not defaulted earlier, should be offered an additional 20 per cent of the outstanding credit. Without this, it is unlikely for many MSMEs to survive in the second wave,” Yogesh Dubey, CEO at essential oils maker Rakesh Sandal Industries and Senior Vice President, Associated Chambers of Commerce and Industry of Uttar Pradesh-Uttarakhand told Financial Express Online.

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In a recent meeting with the Commerce Minister Piyush Goyal, FISME had also urged support across three key areas viz., MSMEs’ inability to provide salaries to employees, fixed electricity charges being paid every month over and above the energy charges despite factories being shut and third, and monthly bank loan EMIs. The RBI had offered a six-month (March-August 2020) moratorium on term loans that had helped MSMEs briefly survive Covid amid disruption in income but the reprieve fell short in addressing their recovery concern amid the demand slump.

Now with the second wave, MSMEs have been hoping for stronger working capital handholding and for a longer period to stay afloat. “The moratorium is not of much help as it simply extends the period. In fact, it has increased concern for MSMEs,” Anil Bhardwaj, Secretary-General, FISME told Financial Express Online.

FISME also suggested sanctioning term loan to firms whose capital expenditure may have got stuck midway, suspending bank loan ratings by external credit rating agencies until normalcy returns, making available ECLGS 3.0 to more and more firms, relaxing NPA, restructuring and enhancement norms on a case-to-case basis, and lastly, period of receivables from government departments and PSUs may not be capped as these are safest assets. The body had on Wednesday also recommended the government to allow home delivery of goods by MSMEs during the lockdown period without a distinction between essential and non-essential products.

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