While expressing happiness over the steps taken by the RBI and Centre to stem the impact of global economic slowdown, the Mysore Industries Association (MIA) has said that the help extended was not significant for the SMEs, which are worst hit in the last few months.
The SMEs need further help from both the RBI and the Centre for their survival, the MIA, which represents Mysore, Chamarajanagar, Mandya and Kodagu districts, said, listing a set of proposals.
It called upon the RBI to revise the definition of non-performing assets (NPAs) for 12-18 months to permit defaults until the industries came out of the recession. Despite some liquidity released by the RBI, the banks have become highly risk averse to NPAs and hence are not releasing required funds to the SME sector, it observed.
It said there was an urgent need to reduce interest rates to boost the demand side of the economy in the areas of housing, automobiles and consumer goods. Availability of credit at affordable prices is crucial to put back the economy on the rails, MIA, said. It pleaded for higher working capital ratios by banks, with reduced margins from the industry.
The Government should urgently come out with differential rate of interest for SMEs to tide over the present crises, it said and recalled in the past differential rates of interest were made available to boost exports. “The present situation pleads consideration of a similar interest rates differential for SMEs,” it said in its letter addressed to the Special State Level Bankers’ Committee (SLBC).
The other suggestions the industry organization has made are advances against book debts be extended to 180 days from 90 days, overdue portion of the working capital be converted as working capital soft loan, and temporary TOD be provided without any additional interest.
For reduction of liability, banks should give permission for liquidations. They should permit change of projects and restructure repayments for existing activity. The 0.25 per cent stamp duty on mortgage for industrial loans should be waived. Delayed payment to SMEs should be effectively implemented. Loans for purchase of DG sets should be provided at concessional rate of interest at reduced margin of 10 cent to meet the power shortage.
Until the economic recession passes off, all the statutory payments like VAT, excise duty, PF, EPF, and ESI should be waived or deferred.
Making the above suggestions, the MIA president P Viswanath said in case the situation does not improve by March 2009, the SLBC should find out other ways to provide additional facility, restructuring and further interest concession.
During the present financial crisis and economic slowdown, SMEs sector are the most vulnerable and need handholding in terms of availability of credit and interest rates, MIA General Secretary Suresh Kumar Jain added.
