Chennai: Consortium of Indian Associations (CIA ), a forum of over 30 associations
spread across India, covering various sectors of businesses, has come forward on a ‘Save M-SME campaign’ and offered itself to be a bridge between the needs on ground and policy creators.
In a statement here, it said it would like to offer constructive criticism for the nation rebuilding. Government of India has launched the “Distressed Assets Funds-Subordinate Debt for MSMEs”, the credit guarantee scheme for sub-ordinate debts, providing relief to two lakh MSMEs.
According to the government, this scheme will support promoters of the operational MSMEs which are financially stressed under banking rules. The guarantee cover worth Rs 20,000 crore will be provided to the promoters who can take debt from the banks to further invest in their stressed MSMEs as equity, hence maintaining liquidity and debt-equity ratio.
According to the scheme, 90 per cent guarantee coverage for this sub-debt will be given under the scheme and 10 per cent would come from the promoters concerned .Ā CIA said it would like to seek the following clarifications from the government.
“Assuming 200,000 MSME are considered as beneficiaries of the Rs. 20000 crore, it works to an average of Rs 10 lakh per company as equity infusion. Is this sufficient to turn around a company or further loans will be offered as debt , equity is raised?” it asked.
It added: “The eligibility or selection process needs to be more clear and specific as a direction to banks as otherwise genuine MSME may not stand to benefit. The biggest concern is that this additional fund infused into the company shall not be used by banks towards regularisation of their stressed account. The scheme says it is eligible for all applicable NPAs as on 30.4.20. However, as per RBI statement, 90-day NPA norm will not include the 90-day period of moratorium granted in the monetary policy of 27 March. So if there is no likelihood of any company falling as NPA after 1 March why not then keep cut off as 1 March, 2020 itself? Is there any change in NPA norms?”
According to K E Raghunathan, the convenor and spokesperson of Consortium of Indian Associations, “if the government’s intention is to help stressed companies to come out of stress and become healthy, then it is important not to pump in further money into companies that are beyond recovery, even if they are stressed now. The better format will be to segregate the stressed firms to declare voluntarily into a company who wants to end and a company which wants to continue.”