RBI’s meet with MSMEs set to focus on lack of redressal forum

Thus, all banks, including public sector banks, are extremely bullish on growing their MSME book. As MSMEs are the key drivers of GDP and employment, the Centre has drawn out elaborative plans to unleash the potential of this sector

MSMEs are all set to emphasise on the difficulties in operations they are currently faced with and a lack of grievance redressal, when they meet RBI mandarins on July 8 in the run up to the Union Budget. They will also include prepayment charges levied by banks at the time of prepayment/change of banks.

The Budget is likely to be presented by the Union Finance Minister Nirmala Sitharaman on July 23.

These concerns have already been raised by MSMEs during their interaction with the Union Finance Minister sometime back.

In their letter, the MSMEs have raised their concerns over RBI’s NPA classification policy meant to be an early warning. The policy, which is in operation since 2013, has proved a disaster for thousands of MSMEs recovering from the Covid pandemic.

According to the policy, banks are required to assign accounts with exposure of Rs. Five crore (fund plus non fund) into three categories: SMA-0 (if account showed signs of incipient stress even if principal/ interest not overdue for more than 30 days); SMA-1 (if principal/ interest payment overdue for 31-60 days) and SMA-2(If principal/ interest payment overdue for 61-180 days). A red flag is raised even if principal/ interest payments get delayed by 30 days. Once an account figures in SMA, the account becomes a pariah both inside and outside the bank bring even the normal banking operations to a grinding halt. This is creating false alarms and even resulting into forced closure.

Talking to Bizz Buzz, Anil Bhardwaj, Secretary General, Federation of Indian Small and Medium Enterprises, who has been invited to attend the meeting, says, “Apart from the points raised before the FM regarding the Budget, we would emphasize to RBI the difficulties in operations and lack of grievance redressal. The letter includes prepayment charges levied by banks at the time of prepayment/change of banks.”

Meanwhile, bankers say that they are extremely bullish on growing their MSME book.

Dhrubashish Bhattacharya, GM, SME, BoB, says, “MSME is the next retail in lending space for all financial institutions. The demand for credit growth in MSME sector is fuelled by the tailwinds of economy and a huge potential to fill the credit gap.”

Thus, all banks, including public sector banks, are extremely bullish on growing their MSME book. As MSMEs are the key drivers of GDP and employment, the Centre has drawn out elaborative plans to unleash the potential of this sector.

“We echo this thought process and want to partner in the growth story of the MSMEs by providing easy access to credit across all segments of MSMEs”, he added.

The meeting will be attended by two deputy governors of RBI, M.Rajeshwar Rao and J.Swaminathan. Besides, FIMSE, the meeting will also be attended by other MSMEs’ bodies like Laghu Udyog Bharti, India SME Forum, , Association of Lady Entrepreneurs of India, Bombay Chambers of SMEs Forum and the Coimbatore District Small Industries’ Association.