SoS from MSMEs after banks issue auction notice to sick unit; Plea to extend moratorium

C Shivakumar @ CHENNAI:
The MSMEs in the state are in a fix as the moratorium on loans is coming to an end on August 31 and many fear they can be tagged as non-performing assets by banks resulting in these units becoming ineligible for loans.

Not only that many of the MSMEs are being served notices by the banks for taking possession of their assets after they were being declared NPAs. Official sources told Express that bankers have been reportedly told in various platforms to help the industry. The state government is not for bankers issuing notices to the entrepreneurs during the testing times. "We will convey our concerns to the State Level Bankers Committee (SLBC) and the Reserve Bank of India through appropriate channels against issuing notices on stressed out units," he said.

Senthil Rajkumar whose company Super Shaper which was launched to cater to the huge demand of boilers and its components says he has been served a notice. A company which had 100 employees in the heydays is now left struggling and is on the verge of extinction after a bank issued a notice under Sarfaesi Act as his unit has turned Non Performing Asset (NPA).

"This unit in Trichy is only my bread and butter. I am getting large orders but don't have funds to buy raw materials. As such many orders are cancelled. On a whole, I require Rs 50,000 a month to ensure my unit survives. I take small orders worth Rs 50,000 to Rs 1 lakh a month and hire contract workers to finish it," he says, adding that after spending on maintenance it is hand to mouth existence.

Senthil has sold all the jewellery and all he has left is the residence and the unit, "If the unit is taken, I don't have anything to survive," he says.

Interestingly, boiler units in and around Trichy have more or less the same story and they have been demanding a bailout package. Interestingly, the Centre has come out with a bailout package to help the MSME units struggling due to lockdown and various other economic factors while turning sick units from March 2018. But the bailout package leaves aside Senthil's and other boiler units which were dependent on BHEL for orders. "We want the bailout package extended till January 2016," says Senthil, adding that he was not in favour of waiving NPAs but wanted the bank to provide him a chance.

With the Atmanirbhar scheme and defence corridor taking shape, MSME units want banks to give the MSME sector time rather than initiate action against them when the entire globe is struggling economically due to Covid-19. Interesting Senthil is not the lone entrepreneur who is struggling. K V Kankambaram, president of Industrial Estate Manufacturers Association (IEMA) says that while the Centre wants to help the MSME sector, the banks are not forthcoming.

Interestingly, the state has formed a committee with representation of associations and bank officials to review the progress of Covid-19 package extended by the Union government through banks for MSMEs.

"The meeting, which was called on July 21 was postponed as only three representatives from State Bank of India, Indian Bank and Indian Overseas Bank agreed to participate," says Kanakambaram who has written a letter to RBI governor asking him to nominate the director of RBI, Chennai region, as member of the committee to attend the meeting.

He also urged the RBI intervention as banks are issuing possession notices to MSMEs. "I have urged the RBI governor, who also belongs to Tamil Nadu cadre of bureaucrats to stop such auction proceedings till the Corona pandemic situation eases," he says.

Meanwhile, Rajappa Rajkumar of Tamil Nadu Boilers Association told Express that he has requested the Prime Minister to come out with a rehabilitation bank to help the sick units. "We have urged a meeting with the Prime Minister to hear the plea of MSME units," he added.

V K Girish Pandian, president of National Confederation of Small Industry (NACOSI) and Committee member of the Collector’s panel to monitor Government financial schemes to MSME units told Express that the need of the hour is to give a helping hand to thousands of MSME units and special care to be given to the sick MSME units so apart from the Emergency Credit Line Guarantee Scheme (ECLGS)  the government should come forward with a strong message to the banks to encourage the restructuring of MSME units and temporarily stop the SARFAESi notices to the MSMe units. He underlined the need for a committee similar to that in the finance ministry, which is monitoring the disbursement of ECLGS scheme, so that  banks and bank officials will come forward to help the sick units.

Tamil Nadu Small and Tiny Industries Association (TANSTIA) general secretary M Hindunathan told Express that MSMEs will be facing a huge challenge with the six-month moratorium coming to an end on August 31. "With no work taking place and no labour and exports already coming to a standstill, the MSMEs are afraid that bank will be branding many of them as non performing assets (NPAs)," says Hindunathan who has yet to receive payments from Hindustan Aeronautics Limited for which he makes components. "The payments are due from a public sector unit. Imagine the plight of many such units who are dependent on payments from the private sector," says Hindunathan.

Interestingly, Tanstia is pushing for an additional three- month waiver on moratorium as no business has happened in the last six months. A key meeting is scheduled by the end of this month and Tanstia will raise the issue, he said. The Reserve Bank of India (RBI) announced moratorium on term loan EMIs till August 31, 2020. Meanwhile, a state government official said that, "With appropriate redressal mechanism in place and with the involvement of RBI and SLBC the issues will be resolved."

Boxes:
What the state is doing to help MSMEs:
Emergency Credit Line Guarantee Scheme
In order to facilitate the Union government stimulus package to the MSMEs, the State Level Bankers Committee was convened on May 30, 2020 with the Tamil Nadu Chief Minister presiding over the meeting with the Bankers. In pursuance to the meeting, under Emergency Credit Line Guarantee Scheme (ECLGS) as on August 20, 2020, additional loan has been sanctioned to 2.40 lakh MSMEs for a sum of Rs. 7,517 crore. Tamil Nadu and Maharashtra lead in sanction of loan under this scheme.

Credit Guarantee Scheme for Subordinated Debt (CGSSD):
The scheme is valid for MSME units which are stressed, viz. Special Mention Account  (SMA-2 ) and Non performing assets (NPA) accounts as on April 30, 2020 that are eligible for restructuring as per RBI guidelines on the books of the Lending institutions. The financial assistance provided as part of the scheme is to be operated as a separate loan account and the promoter needs to infuse the sub-debt or loan amount as promoter’s contribution in the form of equity (including sub-debt or quasi equity) into MSME entity. As on 20.08.2020 loan sanctioned to 582 MSMEs for a sum of Rs.109.74 crore in Tamil Nadu

COVID Relief and Upliftment Scheme (CORUS)
In order to provide relief to the Tamil Nadu Industrial Investment Corporation (TIIC) assisted MSMEs to resume their operation, from the impact of COVID-19, Chief Minister announced CORUS scheme on Mach 31, 2020. Under this scheme loan upto Rs. 25.00 lakh with 6 per cent interest subvention will be provided to the MSMEs without any additional collateral security. As the scheme is operated through online loan sanctions are given within 2 days. So far 1,158 MSMEs given loan sanctioned to the tune of Rs. 133.02 crore.



Why are ancillary units in Trichy struggling?
EXPRESS NEWS SERVICE @ CHENNAI:
It was in the year 2012, Bharat Heavy Electricals Limited gave hope of bright future for power sector and based on that most of the ancillary units went for expansion. Suddenly BHEL announced a shift in policy by which the ancillary units have to purchase the raw material on their own and have to fulfill the orders. The ancillary units went for working capital loan and the banks have extended helping hands to the units. Since, there is a cut throat competition among the units, BHEL stuck to the lower rates and insisted the other units to follow the lower rates which affected the profit margins.

Gradually, BHEL is unable to compete in the global tenders and now don't have much orders. What they have now is a very few new orders and some maintenance works in the existing thermal power plants. As the ancillary units are finding it too hard to repay the dues to banks, the financial institutions have started taking actions for recovery, official sources . It is learnt that Tamilnadu Boilers Association has filed a writ petition in the Madurai Bench of Madras High Court with 27 banks. The case is still pending.

Sources say the major issue plaguing the ancillary units is lack of orders from BHEL as the defence corridor is yet to take shape and the alternate avenue o fabrication of wind mill towers is not promising.