Large corporate defaults squeeze the loan window for small units

Business Standard Smart Business

The loan repayment defaults by large corporates, leading to mounting NPAs of the banks, has squeezed the loan sanction window for small business units. The small business units, who otherwise have a better track record in loan repayment, are suffering for no fault of theirs, said Jasbir Singh Hura, Past President of Sambalpur Chamber of Commerce and Industry (SCCI). 
 

Hura was speaking at Business Standard’s Smart Business event jointly organised with SCCI and Sambalpur Branch of Eastern India Regional Council (EIRC) of the Institute of Chartered Accountants of India (ICAI) on the topic, ‘Curtailing the NPA Menace’. The event was held for the first time in western part of the state.
 

Asserting that small businessmen, particularly traders, are more diligent in servicing their liability, he said, there is less risk in giving loans to them as most of these advances are secured and backed by collateral.  

He also pointed out several discrepancies in the approach of banks in sanctioning of loans to small businesses vis-à-vis large corporates and argued that the 90 days default period (of declaring NPA) should not be applied across the business spectrum. Instead, it should be reframed based on different categories of trade and industry and in consideration of the cause of default, which are often beyond the businessman's hand.
 

Speaking on the occasion, Pradip Lath, representing the Chartered Accountants, spoke on the technical aspects of the NPA. Lath elaborated the definition of the NPA, categories and reasons of NPA and the revival schemes introduced by the Government including the recent one by Insolvency and Bankruptcy Board of India (IBBI).

Vivek Gupta, the Regional Manager of the public sector lender, Bank of Baroda, spoke on the NPA situation and the bankers’ prospective on the same.
 

Referring to his experiences in State Bank of India, Milan K Patro, a former SBI official, spoke on the recovery aspects of the bad loans and how to make revival of sick units more effective.

While Arun Patwari, President of SCCI welcomed all the guests with his introductory address, Chartered Accountant Rajkumar Tibrewal, presented the vote of thanks.