The Business Bytes
TBB BUREAU
BHUBANESWAR, APRIL 10, 2022
The Utkal Chamber of Commerce & Industry Ltd. (UCCIL), the apex association of large, medium, MSMEs, trade, commerce & services, has urged the Rajya Sabha Petition Committee to address the issue of emerging stress on MSME sector by recommending policy intervention by the Union Government to streamline the funding by banking sector.
In a letter to the Rajya Sabha Petition Committee Chairman, UCCI President Brahma Mishra said that the MSME sector is passing through the most challenging trying time.
Citing RBI’s Financial Stability Report, Mishra said that credit to the MSME segment slowed (year-on-year) by the end of September, 2021 vis-à-vis March, 2021.
Under the Emergency Credit Line Guarantee Scheme (ECLGS) 32 lakh credits amounting to Rs. 2.82 lakh crore were sanctioned till November 12, 2021 of which Rs. 2.82 lakh crore was disbursed {Rs. 1.94 lakh crore by Scheduled Commercial Banks (SCB)}, forming 20.6 percent of the incremental credit during the period.
According to RBI report, Micro stress tests for credit risk indicate that the Gross Non-Performing Assets (GNPA) ratio of SCB may increase from 6.9 percent in September 2021 to 8.1 percent by September, 2022 under the baseline scenario and to 9.5 percent under a severe stress scenario.
Citing the growing instances of bad loans among MSME, and transition of low and medium-risk MSME borrowers to the high-risk category, the UCCI President sought government intervention to resolve the issue.
“In such a scenario, unless the Union Government intervenes by changing the existing guidelines, it may lead to closure of most of the MSEM sectors,” said Mishra, adding that “the prices of most of the metals, petrochemical and mineral items have gone up abnormally high leading to unprecedented cash crunch for MSME and start-up sector which has impacted the bottom-line of the working capital of MSME.”
The need of the hour is to relook the banking policy for the survival of these industries, he suggested.
