Categories: Economy

MSMEs fighting liquidity shortage, procedural issues

The country’s micro, small and medium enterprises (MSMEs) continue to reel under a liquidity crunch coupled with lacklustre demand, even as the second quarter of the current financial year draws to a close.

Not just that. The procedural issues plague these enterprises the most.

In a recent note to the Niti Aayog, MSMEs have pointed out that in many cases banks, especially the private sector ones, have been attaching penal or additional charges for shifting of accounts from one lender to the other.

Besides, often loan instalments are not collected or deducted on time by banks, thus resulting in temporary classification of special mention account (SMA)—which essentially means that the account has the potential to become a non-performing asset, a loan account that fetches no return for banks. Once an account is classified as SMA, it becomes even more difficult for the company to get additional loans, often required as working capital.

Meanwhile only about 60 per cent of the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) announced by the Narendra Modi government for the MSME sector has been disbursed so far, the Federation of Indian Micro and Small and Medium Enterprises (Fisme) said.

“Lending by banks is still a matter of concern. MSMEs are facing severe liquidity crunch apart from going through several procedural issues. These need to be addressed at the earliest to ensure that MSMEs survive,” Anil Bhardwaj, secretary general, Fisme, said.

Bhardwaj also said that the overall demand continues to remain weak. “While there was expectation that there would be a V-shaped recovery, in reality it is taking a much longer time. It is important to create demand at this point to boost economic growth,” Bhardwaj added.

The MSME sector in India, which employs about 11 crore people, is crucial for job creation. It is also crucial for economic revival, especially after a shocking 23.9 per cent economic contraction in the first quarter of the current financial year.

India Briefing, a platform providing insights on doing business in India, noted that the MSME base is the largest in the world after China. “The sector provides a wide range of services and is engaged in the manufacturing of over 6,000 products—ranging from traditional to hi-tech items,” the India Briefing website said, adding that there are about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises in the country..

AddThis Website Tools
Mahua Venkatesh

Mahua Venkatesh specialises in covering economic trends related to India and the world along with developments in South Asia.

Recent Posts

All visa applications treated on merit basis, MEA on US visa issues for Indian nationalsAll visa applications treated on merit basis, MEA on US visa issues for Indian nationals

All visa applications treated on merit basis, MEA on US visa issues for Indian nationals

The Ministry of External Affairs (MEA) has taken note of the new guidelines issued by…

6 hours ago
“India’s concern on terrorism was not acceptable to one country’: MEA on Rajnath Singh refusal to sign SCO joint statement“India’s concern on terrorism was not acceptable to one country’: MEA on Rajnath Singh refusal to sign SCO joint statement

“India’s concern on terrorism was not acceptable to one country’: MEA on Rajnath Singh refusal to sign SCO joint statement

The Ministry of External Affairs on Thursday said India refused to sign the joint declaration…

6 hours ago
India evacuated 3,426 Indian nationals from Iran, 818 from Israel in Operation Sindhu: MEAIndia evacuated 3,426 Indian nationals from Iran, 818 from Israel in Operation Sindhu: MEA

India evacuated 3,426 Indian nationals from Iran, 818 from Israel in Operation Sindhu: MEA

The Ministry of External Affairs spokesperson Randhir Jaiswal said that India, so far have evacuated…

6 hours ago

Axiom-4 piloted by Group Captain Shukla docks successfully at International Space Station

Axiom 4 mission aboard the SpaceX Dragon spacecraft successfully docked at the International Space Station…

7 hours ago

First Kashmiri-Kannada film ‘Harmukh’ captivates audience in Srinagar

In a significant moment for regional cinema and cultural dialogue, the premiere of 'Harmukh', the…

8 hours ago

“Language is the soul of a nation, not just a medium of communication,” says Union Minister Amit Shah

Union Home Minister Amit Shah on Thursday said that languages were not just a medium…

10 hours ago