The minister advised businessmen not to spend money on a lavish lifestyle and instead use it for business
Small businesses in the state are on a deathbed, state revenue minister Kaushik Patel said on Saturday. Patel said that both the government and the entrepreneurs need to ponder over it to improve the financial condition of the units.
Addressing a seminar titled, 'MSME Banking and Finance Meet', organised by Gujarat Small Industries Federation (GSSIF) in the city, Patel attributed the existing condition to lack of sufficient and timely access to working capital to the entrepreneurs.
The minister advised businessmen not to spend money on a lavish lifestyle and instead use it for business.
He expressed readiness to make necessary policy changes to encourage small businesses.
Citing the critical role played by the Micro, Small and Medium Enterprises (MSMEs), he said MSMEs are at the forefront of job creation and revenue generation, and so the sector is high on the agenda of the government.
Small industries have demanded that the period to be declared a Non Performing Asset should be increased from 90 days to 180 days for smaller businesses. They claim that non-repayment is not because of lack of intention to pay but due to cash flow bottlenecks, and if the duration is raised, the bottlenecks would automatically open up.
Delivering a lecture at the meeting, Atul Kapasi, president of GSSIF said that most of the cases of NPAs by small businesses occur because of the shorter loan repayment period of 90 days.
"There was a case where a unit did not receive the subsidy from the government and consequently was not able to repay the instalment and was termed as NPA. In another case the instalment was paid in 91 days but the unit was termed as NPA," said Kapasi.
He also demanded that banks increase the share for MSMEs in priority sector lending from 20% to 40% as the definition of MSMEs has been revised.
With the upper limit of MSME turnover having been set at Rs 250 crore, 99% of the units now fall in this category.
"Now there is a case to seek higher share in priority sector lending by the banks. We want the government to raise the share of MSMEs to 40%," said Kapasi.
Banks are making changes in the lending norms, giving high priority to cash flow of a business, as opposed to the traditional practice of lending on the basis of availability of collateral.
These loans will be available online and there is no need to visit bank branches, said Parminder Singh, DGM of State Bank of India (SBI) in Gujarat.
Singh said that new parameters are conducive to businessmen with financial discipline, which improves their rating reducing the interest burden.
"Almost 65% of such businesses have improved their ratings and are availing of lower interest rates," said Singh.
SME sentiments improving: SIDBI
Small businesses in the country are more optimistic for the next quarter, a top official of Small Industries Development Bank of India (SIDBI) said, citing CRISIDEX, an index based on the responses from SMEs. The index, jointly developed by CRISIL and SIDBI, seeks feedback from 1,100 SMEs from across the nation on the business scenario, and rates their confidence on a scale of 0-200. “In the latest survey for October-December quarter, the confidence was rated at 107, meaning ‘mild positive’. However, the SMEs are more optimistic about the next quarter as they feel that capacity utilisation will rise as well as the position of order books will be healthier,” said Pravesh Agrawal, GM of SIDBI in Gujarat.
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