Protect bizmen while trying to control NPAs: Industries

Interests of genuine businessmen who are unable to repay loans due to circumstantial reasons should be protected while trying to curb bad loans, said local representatives of industries. They suggested that small businesses should not fall victim to collateral damage, for which large industries are responsible.

The response comes in the backdrop of recent guidelines by banking watchdog the Reserve Bank of India (RBI) to the banks for recovering dues from businessmen. RBI has prepared a detailed roadmap on how to recover bad loans.

While there is a consensus in the local business community that willful defaulters should not be spared, businesses who are unable to repay loans because of circumstances should be given fair time to save their business.

President of Gujarat Chamber of Commerce and Industry (GCCI) Shailesh Patwari observed that there are no built-in mechanism within the roadmap to distinguish a willful defaulter from a circumstantial defaulter and the later can fall prey if things are not managed with sensibly.

“There are a number of reasons why a businessman is unable to repay the loan as factors affecting repayment may be out of his control. They should be clubbed with willful defaulters who need to be punished. We want a screening committee to judge the merits of a case and then proceed for the sell-off only if it is inevitable,” said Patwari.

He said it was not just a financial matter but also a social matter as it affected the social status of a borrower. Financially, it would be very difficult for him to get a loan next time. Therefore, it was necessary for the banks to differentiate a genuine case as against a willful default.

After the rollout of Goods and Services Tax (GST), the refunds of most of the businessmen has been blocked in the system, resulting in a crisis of cash liquidity. Such factors play a vital role in repaying a loan.

Players say that it is large businesses that have a lion’s share in bad loans, measured as Non-Performing Assets (NPAs), while most small businesses are interested to continue their business and their interests should be safeguarded.

“One simple way to do this is to extend the repayment period from 90 days to 180 days for a unit to be declared as an NPA. This will give small businesses enough room to repay loans,” said Atul Kapasi, president of Gujarat State Small Industries Federation.

REFUND WOES

After the rollout of Goods and Services Tax (GST), refunds of most of the businessmen have been blocked in the system, resulting in a crisis of cash liquidity. Such factors play a vital role in repaying a loan. Players say large businesses own most of the bad loans.