Micro, Small and Medium Enterprises (MSME) of Assam and North-East are in a fix. On one hand, it is the economic slowdown; and on the other hand it is the credit crunch due to the “general reluctance” of the banks to lend in the region, especially since the onset of slowdown.
Since most of the industrial units in the region fall under the micro and small category, their sustainability is at stake in the wake of economic downturn. They are fighting the twin problems of falling demand and rise in input cost, including raw materials. Though only healthy flow of credit could have come to their rescue at this hour, industry people say that banks have rather become more conservative now.
They are also of the view that the delays by the centre in disbursing transport subsidy, that has been assured under the centre sponsored North-East Industrial and Investment Promoting Policy (NEIIPP) 2007, adds to their woes. And top of it, the banks are reluctant to honour those entitled subsidies as collaterals when it comes to give loans to micro and small units.
“First we need to make the investments and subsidies and incentives come later. Since the capital of micro and small units is always less and working capital gets stuck in those delays, we face liquidity constraints to sustain our operations. Credit from the banks, by honouring those entitled subsidies by the centre, could be the only way to solve our liquidity problem and make us sustainable and viable,” said RS Joshi, President of Federation of Industry and Commerce of North Eastern Region (FINER), the premier trade and industry body of the region.
“This (reluctance of the banks to give credit to micro and small units) is indeed the biggest problem we have been facing. We (FINER) took up the matter with RBI also,” added Joshi, who is an entrepreneur engaged in steel engineering sector and equally affected due to liquidity crunch.
FINER has demanded that the RBI should come out with some norm asking the banks to honour the entitled subsidies as collateral when it comes to give loans to micro and small units in North-East.
“Entitled subsidies from the central government are very secure things. RBI should come out with some norm for banks here in North-East to honour them as collateral,” said Joshi.
Joshi said that pre-slowdown, the banks were “reasonably better” but now the “tempo” of doubling the MSME loans has gone.
He said that the claim of banks of increasing their credit to MSME sector in North-East is just a jugglery of figures. Since MSME also include medium sized units, banks mostly prefer them when it comes loan; and claim to have increased their credit flow to MSME sector as a whole.
He said that barring State Bank of India, almost all other public sector banks have a “general reluctance” not to go for more exposure in this region, especially in this slowdown phase.
Even, the banks, allege industry, are reluctant to lower their interest rates for the MSME sector, despite the RBI being pro-active through its monetary policies.
When contacted, bankers from few public sector banks have refused to buy the allegations of the industry people and said that they are not at all conservative when it comes to lending the MSME sector in North-East.
Refuting the allegation that banks do not honour entitled subsidies as collateral, a banker of a leading public sector bank said that the bank does not take any collateral for loan amount of up to Rs. 50 lakh.
Satish Kalra, Zonal Manager of Punjab National Bank (PNB) too echoed same views. “When it comes to lending to micro and small units, let me say, in North-East we are the number one. We have till last fiscal given credit to the tune of Rs. 100 crore to mirco units in the region,” Kalra said.
Also bankers said that they never discriminate between micro and small and medium sized units in the region.
