MSMEs seek quick action from banks on availing of credit facility

As they get into restart mode, MSMEs (micro, small and medium enterprises) seek banks and financial institutions’ swift action in releasing emergency credit facilities as part of Centre’s stimulus measures.

While some banks like the State Bank of India, Canara Bank, Union Bank of India and Indian Bank have issued guidelines, MSME associations indicate that majority of lending institutions are yet to release any guidelines for credit facilities.

“As of Friday evening (May 29), no MSME or business enterprise availed loan under the Emergency Credit Line Guarantee Scheme (ECLGS). Many banks, financial institutions and NBFCs are yet to issue guidelines. It is heard that at branch level, the banks will reach out to the beneficiaries who are eligible and therefore enterprises need not disturb them with requests,” according to KE Raghunathan, Past President, All India Manufacturers Organisation.

The ECLGS aims to provide much-needed relief to the Covid-19 impacted MSME sector by incentivising lending institutions to provide additional credit of up to ₹3 lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.

While credit offtake is yet to commence, many individuals and organisations received messages to pay EMI in the first week, without extending the moratorium by another three months as announced by RBI, said Raghunathan.

Many MSME owners have also reported that banks were making ‘cheque return’ charges of ₹240 for the past 2 months period, even though moratorium was availed. Meanwhile, MSMEs who may not be able to avail the loan facility, are worried about the cash flow situation for paying salaries, he added.

Too early to tell

X Arokianathan, Co-Convenor, MSME Panel, Confederation of Indian Industry-Tamil Nadu, said that while things were moving on the banks’ side, it is too early to comment on the flow of credit to the needy.

“During our panel meeting a few days ago, two prominent bankers explained the loan schemes and their commitment to helping the MSME. A day later, we received a call from our bank SBI about the loan facility available for us,” he said.

In line with the guidelines of ECLGS scheme, PSBs like State Bank of India, Indian Bank, Union Bank of India and Canara Bank have come out with their loan product scheme and released guidelines to their respective branches to extend credit in the form of working capital loan to eligible MSME and business enterprise (non-MSME) borrowers.

“While the Finance Minister said she would personally monitor about this loan distribution on a weekly basis, the banks are yet to gear up to follow on letter and spirit. The bankers are inclined to look at proposals that have strong merits and good credit history, said G Karthikeyan, Coimbatore-based Chartered Accountant.

Meanwhile, the PSBs are now constrained with low staff strength due to Covid-19 and the mega bank mergers.

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