The Centre and RBI may have come up with various relief measures for small and medium enterprises to tide over the pandemic-led crisis, but various last-mile issues are impeding their effective implementation. This includes industries getting funds from banks to serve as additional working capital.

While companies have welcomed the various steps taken to enhance liquidity in the banking system, facilitate bank credit and ease regulatory measures to reduce the financial stress, they seek acceleration of efforts at the bank branch level. The availability of additional working capital will be critical for sectors such as textiles and engineering to restart operations once the lockdown ends, industry players said.

Several industry associations have started putting in place the working capital and other requirements for their members. They have requested the Finance Ministry and RBI to advise banks to expedite credit so that businesses can be restarted quickly.

Need for speed

“Our survey indicates that while the steps taken by the government and RBI are very proactive, the last-mile implementation of the same could kindly be hastened,” says Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF).

The ITF had undertaken a survey of 205 of its member companies representing the entire value chain of textile manufacturing covering bank exposure in excess of ₹,3500 crore. The survey revealed that only 19 per cent of the applications seeking additional working capital had been approved. For 48 per cent, it was still being processed, while 31 per cent were awaiting responses to their submissions.

“We are very much aware of the difficulties faced by banks, too, in the current situation, with fewer working hours. However, it will be of great help if banks expedite the process for loan applications for the survival of industries,” said Dhamodharan.

Officials at bank branches, meanwhile, said they are working with minimal staff for emergency transactions. Full-fledged transactions and loan sanctions will happen only after the lockdown is lifted.

Small and medium units that BusinessLine spoke to said the bank branches are waiting for instructions from the head office; most branch mangers — be it public or private sector banks — are clueless about the ‘additional working capital’ scheme, they observed.

A textile firm owner said his bank was not processing his application for want of credit rating.

Beyond rules

Members of the Ambattur and Guindy Industrial Estate Associations in Chennai said banks should handhold MSMEs as the pandemic has compounded their woes. The rule book may be kept aside for a while, they observed.

“Banks should show maturity in their due diligence process,” said CK Mohan, former General Secretary, TANSTIA (Tamil Nadu Small & Tiny Industries Association). “They should consider the reputation of the establishments, their existence for years and their strong link with the supply chain of big industries instead of mere documents and other financial parameters while sanctioning loans.”

Meanwhile, the heads of more than a dozen industrial associations have written to Finance Minister Nirmala Sitharaman, seeking a unified national policy from the RBI that would apply to all banks. The RBI should direct all the banks to pass on the benefits to MSMEs with immediate effect, they said, further suggesting that the ‘guidelines’ issued earlier be replaced with clear ‘directions’.

Sanctioning of funds should not be based on internal ratings, as Covid-19 is global crisis, they said. The drawing power should not be assessed and reduced based on the lower sales, receivables or lower stocks of companies. Sales have been generally depressed across all segments of the industry. The worst affected have been the MSMEs, they added.

Related Topics