Insulate MSMEs from Basel III guidelines: Tea body urges government

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Chennai | Published: August 7, 2019 4:21:04 AM

According to him, the requirement of credit rating insisted under Basel III norms before getting loans from banks are not at all necessary, as the rating is not reflecting the true nature of whole knitwear/readymade garment sector and the real performance of the respective unit.

MSMEs, MSMEs Basel III guidelines, Basel III guidelines, rbi, rbi norms The association has requested the government not to insist on credit rating before getting loans under Basel III norms.

The Tirupur Exporters’ Association (TEA), the largest knitwear/readymade garments cluster in the country, has urged the central government to insulate MSMEs from Basel III norms. The association has also requested the government not to insist on credit rating before getting loans under Basel III norms.

Raja M Shanmugham, president, TEA, who took part in the meeting called for discussing a number of issues pertaining to MSMEs, said in a press release that every bank already has its own rating mechanisms which are much more robust than the rudimentary process being followed by these MNC rating agencies.

“It is high time that at least the MSME segment is totally exempted from external rating requirement and replaced by either the bank’s internal rating or create a parameter based automatic rating module through any agency under supervision of RBI so that this unnecessary hardship and cost being thrust on MSME entrepreneurs could be totally eliminated,” he pointed out.

Some of the measures, including insulating MSMEs from adopting Basel III norms and limit to corporates; NPA classification norms should be brought back to 180 days instead of 90 days prevailing now while evaluating the unit; restructuring two times to have a leverage after considering the sessional nature of the business are panacea to cure the illness of MSMEs, Shanmugham said.

According to him, the requirement of credit rating insisted under Basel III norms before getting loans from banks are not at all necessary, as the rating is not reflecting the true nature of whole knitwear/readymade garment sector and the real performance of the respective unit.

He also pointed out the repercussions in the employment side, including repayment of loans to banks if the issues are not immediately resolved. He futher requested that the Merchandise Exports from India Scheme (MEIS), a lifeline support given to exports including readymade garments, has been removed from August 1, 2019 onwards due to more pressure coming from WTO, further to a complaint lodged by the US with WTO dispute settlement body.

We wish to mention here that the scheme (MEIS) was actually introduced for offsetting the infrastructural inefficiencies faced by exports of specified goods including readymade garments to provide a level-playing field.
It is a fact that the enhanced competitiveness is mainly needed to sustain in the global market.

Hence, the ministry concerned should make an alternative arrangement in place of MEIS to enhance the competitiveness of beleaguered knitwear garment exporting MSMEs in Tirupur and sustain in the global market.

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