Gujarat apex trade body says small business are not benefitting from RBI's rate cuts, writes to Union Finance Minister for relief
Banks are interested in lending to only large companies and as a result not enough funds are available for smaller businesses, Gujarat's apex trade and industry body recently complained to Finance Minister Nirmala Sitharaman. It also suggested a special formula for lending to small players and said that while the national banking regulator is reducing benchmark interest rates, it is not getting translated into reduced interest rates for the borrowers.
"Banks are interested in funding large companies and the MSMEs are getting left out. This results in a situation where MSMEs have to either manage with less than adequate funding or borrow funds from micro-finance companies at very high interest rates," said a letter by Gujarat Chamber of Commerce and Industry (GCCI). It said that while funds are available to small businesses, they are not adequate and a wide gap exists in demand and supply of funds for them.
GCCI drew attention of the minister to the fact that the Reserve Bank of India has reduced interest rates by 110 basis points in the past few months, but banks have not made loans cheaper for the borrowers. Banks should be directed to pass on the benefits to commercial borrowers with immediate effect, said the trade body. A regulatory mechanism is suggested for ensuring that the rates are standardized and kept low, especially in case of MSMEs, it said.
The leading trade body also suggested that keeping in mind the existing economic situation, banks should also display some flexibility in terms of declaring bad loans as well as in payment cycles. It suggested phase-wise classification of loan accounts as Non Performing Assets (NPA) be revised from 30, 60 and 90 days to 60, 120 and 180 days respectively, to enable MSMEs manage their credit effectively. Also as businesses are facing shortage of liquidity, banks should offer relaxed repayment terms to businesses.
"Our suggestions are such that they can be implemented in a short notice and get results faster. Particularly, in case of NPA, if a company enters into the NPA cycle, it is like a one-way street. It is very difficult to get into positive cycle again. Therefore relaxation of deadlines should be done on immediate basis," said Durgesh Buch, president of GCCI.
GCCI warned that the provision within Goods and Services Tax that a businessman can be arrested if the tax official has the reason to believe that tax evasion is likely to be more than Rs 5 crore, gives the official tremendous powers and is prone to misused. It suggested that there should be a monitoring and approval authority which sanctions such action by the commissioner.
Considering the fiercely competitive environment in which small businesses operate, the process of funding and granting of Environment Impact Assessment and Environment Clearance Certificate should be expedited, said GCCI.
HUGE GAP IN DEMAND AND SUPPLY
- In its letter to Finance Minister Nirmala Sitharama, GCCI said there is a huge gap in demand and supply of funds for small businesses
- It also expressed concerns over the provision of arrest of a businessman in the case of suspected GST evasion, saying the law could lead to misuse of power
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