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Karnataka News: Sans support from banks, 40% MSMEs may perish | Bengaluru News

Estimates suggest 6.7 lakh MSMEs in Karnataka could close if banks do not heed the Centre’s diktat and disburs…Read More

BENGALURU: A significant number of micro, small and medium enterprises (MSMEs) face the threat of going out of business, what with the banking sector allegedly failing to pass on benefits of the Centre’s stimulus package. The package was unveiled to bail out industries hit by the nationwide lockdown.
Trade bodies have estimated about 40% of 6.7 lakh MSMEs in Karnataka may close down if they fail to get banking support quickly. Bankers on the other hand say they are worried about non-performing assets (NPA) piling up and fear unsecured loans may push NPAs up further. Obviously worried over the issue, state government is monitoring the situation closely.
“Two months of the present quarter have already been unproductive which makes the next two months crucial,” said Guarav Gupta, principal secretary, commerce & industries. “I hope things fall into place quickly.”
MSMEs are considered crucial for the recovery of the economy as they contribute nearly 25% of GSDP with a cumulative monthly turnover of Rs 35,000 crore.
Last week, ISN Prasad, additional chief secretary (finance), convened a meeting of members of the State Level Banking Committee (SLBC) and urged bankers to “cooperate” and help the state government in its endeavour to shore up the industrial sector. Industrialists, however, say bankers are yet to warm up to the clarion call. Gupta said he will convene another review meeting soon to take the stock of the situation.
“I have asked SLBC to submit data on compliance of banks in terms of implementing the Centre’s package. We will discuss the data and take a call on further action,” Gupta said.
Industrialist say banks are reluctant to follow the Centre’s diktat and lend up to 20% of working capital without seeking collateral. The Centre had set aside Rs 3 lakh crore for MSMEs in its Rs 20 lakh crore stimulus package. The reduction of RBI’s repo rate to an all-time low of 4% has also not translated into lower interests rates on loans. Industries had expected at least a 3% drop in interest rates on existing loans. The construction sector too faces similar problems.
Industries are also seeking a one-year interest-free moratorium, but their pleas have fallen on deaf ears.

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