MSMEs upbeat on RBI move to relax NPA norms

Hyderabad: The micro, small and medium enterprises (MSMEs) across Andhra Pradesh and Telangana are in an upbeat mood now, thanks to a slew of measures announced by the Reserve Bank of India in its monetary policy on Wednesday to support them.

Foremost among the steps initiated by the apex bank was its move to offer additional 180-day period for MSMEs adversely impacted by the GST implementation and demonetisation, to clear their bank loan dues. Representatives from industry bodies say this move has come as breather for ailing MSMEs hit by existing non-performing asset (NPA) norms under which a company is declared an NPA if loan repayment is delayed by 90 days.

“It’s a great move that will benefit MSME sector. We have been demanding that NPA norms should never be imposed on MSMEs. The existing 90-day norm is death knell for the industrial sector. Thankfully, RBI has extended the period to 180 days,” Gowra Srinivas, president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI), told The Hans India.

He further maintained that many business verticals were cyclical in nature, making it difficult for several industrial, trading and commercial units to comply with repayment norms regularly.

“FSME India has been fighting for this for the past few years. Banks are now declaring loans and companies as NPAs if borrowers fail to repay an installment within 90 days after due date. But it’s not always feasible for companies to comply with this norm. It is more so for MSMEs,” said Arani Prasanth Kumar Reddy, national president, Federation of Small and Medium Enterprises of India (FSME India). He further said that demonetisation and Goods & Services Tax (GST) implemented had crippled the sector.

Expressing his gratitude to RBI for heeding to the request of FSME India and other industry bodies which represent MSME sector, he said industrial units enjoyed 180-day grace period on loan repayments in the past. “With the Indian government committing to Basel norms, time for declaring a credit asset as NPA has been reduced to 90 days, thereby pushing scores of MSME units towards extinction,” he explained.

Anil Reddy Vennam, industrialist and vice president-south, All India Plastic Manufacturers Association (AIPMA), while appreciating the RBI’s decision, also said that the apex bank should eliminate many other anomalies.

“At present, large and small companies are treated with equal-footing when it comes to NPA norms. This is totally unfair because banks take 200 per cent collateral from the small companies, which is not the case with large corporates,” he said.

He also found fault with SAFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) which, according to him, turned detrimental for small and medium companies.

“Banks are going for the auctioning of properties and assets offered as collateral by a borrower immediately after his or her account turns NPA and selling them at throwaway prices. Entrepreneurs are also forced to sell properties which are not offered as collateral if there is any gap between recovered amount and loan amount,” he said.

FSME’s Reddy also sought more such incentives for the MSME sector. “Establishing a company and running it is not an easy task. Despite claims of top ranks in ease of doing business, entrepreneurs are still required to run from pillar to post for obtaining numerous permissions for setting up a business.

It’s not any different in Andhra Pradesh and Telangana which shared top honours in last year’s ease of doing business rankings,” he observed, explaining that it would take at least three years for a new entrepreneur to put his or her business on profitable track.