Letters to the editor dated May 26, 2020

This refers to the editorial ‘Material disclosure’ (May 26). There was widespread thinking that the lockdown might impact the operations of the market, but there hasn’t been much affect on the running of the market. The regulator’s assessment that “only few companies have informed the exchanges about shutdown of operations due to the pandemic, sanitation of premises, safety of employees and so on” was correct. Since people partaking in share trading operations generally use telephone contacts, and the systems were functioning quite normally, the share markets could work. The impact on general working in other fields had, however, been visible.

Coimbatore

This refers to ‘Centre’s Covid response ticks all boxes’ (May 26). The Central government has taken a holistic approach while introducing the relief and fiscal stimulus measures, aimed at kick-starting the economic activities which became dormant on account of Covid-19. While the key objective is to drastically escalate consumption, it is critical to ensure that the abundantly available liquidity flows into the hands of the end beneficiaries. While the beneficiaries are from different strata of the economy, the onus is on the lenders to identify them, evaluate the credit requirements and ensure the use of funds for the mandated purpose.

Allowing asset classification relaxations, and other development and regulatory measures initiated by the banking regulator to ease the financial distress is also equally important to arrest the outstanding credit from turning into a bad asset. In order to rejuvenate the MSME sector, an additional moratorium period, additional working capital, relaxation in the computation of the drawing power by reducing the margin on the working capital limit, funded interest term loan, pre-approved loans in terms of the guaranteed emergency credit line, all have to be executed scrupulously. The chances of a flood of non-performing assets can’t be ruled out after the expiry of the moratorium period in vogue. Additionally, the fresh finance to be granted in terms of the fiscal stimulus will be disbursed at a time when the businesses are unpredictable. Extremely strong oversight and review mechanisms are essential to ensure the speedy flow of credit to the needy; but at the same time, it is also imperative to make sure that the resources are deployed to attain the intended purposes.

Kottayam

Apropos ‘A lifeline for MSMEs’ (May 26). Though the Atmanirbhar package does not directly put money in the people’s pocket, it has rejuvenated the MSME sector with a distrupted supply chain and collapsed demand.The guaranteed emergency credit line for MSMEs, which has been strategically packaged without a direct fiscal impact, is a boon for the sector. Financial assistance will revive MSMEs from the current crisis and the save loss of jobs, which is a key demand booster. Yet, the onus of utilising the new loan facility lies on the MSMEs. It is the vital responsibility of SIDBI and the lending banks to avert NPAs under the new scheme since bank money will be at risk of dismal performance of the MSMEs.

Sivakasi

Apropos ‘Protect bankers’ interest for free flow of credit to small firms: Seshagiri Rao’ (May 25). The credit guarantee scheme announced by the government for loans provided to MSMEs is a welcome step that protects the banks’ bottomline, should these loans go bad. But it still does not motivate the bankers to lend, considering their past bitter experiences.

Banking being primarily a business of ‘deposits and advances’. The latter turning into NPA is inevitable, due either to an adverse business climate, or to the recalcitrance of individual borrowers. While the corrupt officials need to be punished, those following the norms should feel protected for bonafide credit decisions taken in the normal course of business. It should be remembered that whereas an investigating agency looks at a banking transaction through a tooth comb, post facto , a banker is expected to gauge the borrower’s intent to repay, besides his capital and capacity, as part of credit appraisal.

Chennai

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