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Mr T. S. Narayanasami

Our Bureau

Mumbai, Nov. 26 Bankers have agreed to consider the demand of small and medium enterprises to relax the lending and repayment norms to help them tide over the current difficult situation.

Representatives from micro, small and medium-scale enterprises met officials of the Indian Banks’ Association on Wednesday. While IBA can ask its members to consider some of these demands, some proposals would need approval from the Government or the Reserve Bank of India, said Mr T.S. Narayanasami, Chairman, IBA.

IBA is expected to consider the SMEs’ demands after its meeting with the RBI on November 28.

The representatives demanded an easing of margin requirements i.e., higher percentage of loans against the value of inventories. The IBA Chairman said the working capital loans could be assessed on a case by case basis.

Another demand was that banks should not charge extra interest on delayed bill payments, as the companies were facing delay in getting their payments.

The SMEs also requested the IBA to lower the rates of interest on loans. They sought interest rate subsidy similar to what was being given to farmers. The decision to provide subsidy can be taken only by the Government and is not within the purview of banks, Mr Narayanasami said.

SMEs also asked for moratoriums on term loans for a minimum period of one year. They also wanted the duration after which a loan is categorised as an NPA to be increased from the current 90 to 180 days.

The total exposure of the banking system to SMEs as on September 30 is around Rs 1,50,000 crore, Mr Narayanasami said.

The SMEs also wanted the export finance to be made available to them at lower interest rates, along with a fast track credit delivery system. This would speed up the process of credit delivery to enterprises with a satisfactory track record.

Enterprises operating in States facing power shortage asked for short-term loans at lower interest rates to buy generator sets.

Some of the associations that attended the meeting included the Automotive Components Manufacturers, Bombay Chamber of Commerce and Industry, Chamber of Small Industry Associations, the Gem &Jewellery Exports Promotion Council, and Sea Food Exporters Association of India.

The SMEs are facing stress following a contraction in demand — both globally and domestically — leading to a piling up in inventories.

The slowdown will affect the SME sector the most because they will be hit by the slowdown in the economy as well as rising costs.

While the public sector banks have done enough by cutting interest rates, the industry has not responded by a cut in prices, Mr Narayanasami said.

“A cut in prices by manufacturers will take care of movement of money across manufacturing, distribution and consumption,” Mr Narayanasami said.

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