RBI's relief: Hit by second Covid wave, MSMEs call for more support

Micro, small & medium enterprises (MSMEs), which have been hit badly by the second wave of Covid, have said that the Reserve Bank of India’s (RBI’s) steps to ensure liquidity and provide support are not enough. According to them, measures such as revisiting classification of bad loans and clearing pending dues from government agencies are also required.
 
“The RBI has most correctly recognised how small businesses and financial entities at the grassroots level are bearing the considerable burden of the pandemic. It has, thus, unveiled measures to help them,” said Deepak Sood, secretary general of ASSOCHAM.
 
“It’s a great move and will boost the confidence of businesses. But the problem with loan restructuring is that it is difficult for businesses to prove the viability of a business on paper at this time due to the uncertainty caused by the second wave,” said Mukesh Gupta, president, Chamber of Indian Micro, Small and Medium Enterprises.

 

Gupta further said that restructuring should be allowed for loans that have been categorised as non-performing assets (NPAs). According to RBI norms, a borrower’s account has to be a standard asset.
 
“In fact, after restructuring, the account should be categorised as a standard account, if the bank thinks that the project is viable,” he said, adding that delayed payment to MSMEs by various government agencies and large corporates continues to remain a challenge.
 
The RBI on Wednesday announced measures to ensure liquidity and provide support to small businesses that have been hit by the second wave of Covid.

 
It allowed re-opening of one-time restructuring for individuals and MSMEs till September 30. In cases where individual borrowers and MSMEs have availed restructuring of loans that provided a moratorium of less than two years, banks are being allowed to modify the moratorium period up to two years.
 
For MSMEs restructured earlier, banks are allowed to review working capital sanctioned limits based on a reassessment. The imposition of lockdown across several states has hurt small businesses the most. It is felt that support to small businesses is crucial. as they are major job creators.
 
Last week, the Federation of Indian Micro, Small and Medium Enterprises (FISME), in a letter to the finance ministry, said that more than the requirement of additional funds, the greatest need for MSMEs is flexibility in assigning NPAs.