The Hindu Business Line : SMEs face difficulties in getting bank loans

Hyderabad, Dec. 7 Small and medium enterprises are feeling the heat of the slowdown and are facing difficulties in accessing credit from banks, according to industry experts.

While the real impact of this ‘caution’ on the part of the banks is yet to be felt in a significant way, there is an early signal to what could be in store for SMEs in days to come as far as availability of credit is concerned, according to Mr Gurumurthy, Project Director, German Technical Corporation (GTZ), which liaisons between the SMEs and banks for credit.

“Generally, financing to SME sector is not to the desirable level. The fears of economic slowdown and its adverse impact on SMEs, coupled with the liquidity crisis faced by banks till recently, have brought in new troubles,” Mr Gurumurthy told Business Line.

Mr D.E. Ramakrishnan, President of Industrial and Financial Reconstruction Association for Small and Tiny Enterprises (IFRASTE), and Member of the National Board for Micro, Small and Medium Enterprises, Ministry of MSME, said: “The issue in extending credit to SMEs seems to be one of the fear of the unknown as currently liquidity per se is not a problem.”

The banks, however, say that it pays to be prudent in current economic scenario. “Some export-oriented units and the SMEs which are vendors to some majors are facing some problems. Their cash flow gets affected; their ability to repay too would be impacted ,” said an official of HDFC Bank.

“We are seeing delays in global receivables and shrinking orders in some SMEs. We will be cautious in lending,” Mr Vijay Chandok, Head of SME Business, ICICI Bank, said here recently.

Financially sound SMEs are also holding back expansion plans involving deployment of new capital, he observed.

Some public sector banks are also worried about lending to SMEs. “As this is election season, there is lot pressure from the Government to continue to fund risky sectors such as SMEs. While the private banks can have a choice to go slow, we have specific targets to meet in this sector, notwithstanding serious concerns of non-performing assets,” said a top functionary of leading public sector bank.

“Whatever may be the reasons, the SMEs are at the receiving end. The Government should chip in and help as the capacity of SMEs to withstand a shockwave like this (slowdown). Some sort of fiscal stimulus should be planned for themSMEs,” Mr Ramakrishnan said.

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