MSME body Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) in a letter the Reserve Bank of India Governor Shaktikanta Das has urged for extending the repayment period below the Emergency Credit Line Guarantee Scheme (ECLGS) 1. to 5 years from 3 years soon after the moratorium period. The government had last month extended the ECLGS 1. moratorium period — wherein MSMEs had to repay only interest — from one year to two years although the period for repayment of principal quantity and interest was 3 years. Moreover, CIMSME also asked for permitting the extended repayment period to be applicable to all MSMEs who had availed credit below ECLGS 1. as an alternative of restricting it to borrowers who are eligible for loan restructuring as per RBI suggestions dated May 5, 2021.
“ECLGS catered to MSMEs’ daily expenses. Amid Covid, the cost of production has increased due to increased time for raw material procurement because of limited transportation facilities and also for the conversion of raw material to finished product. Further lack of labour, end-use of ECLGS for fixed expenses instead of working capital have also hit MSMEs’ profitability. Hence, MSMEs won’t be able to generate enough cash to repay this credit in three years after the moratorium period,” Mukesh Mohan Gupta, President, CIMSME, which represents more than 1 lakh MSMEs, told TheSpuzz Online.
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The government had also announced last month further help of up to 10 per cent of the outstanding credit as of February 29, 2020, to borrowers covered below ECLGS 1. as per the RBI suggestions. “The repayment period under the ECGL scheme should be increased to five years as MSMEs have little business and are operating at a very low capacity whereas overheads and raw material cost have increased substantially especially in the case of steel. The raw material cost has also practically doubled and other overheads have also increased. The cost of production has increased due to higher oil prices, safety implementations of personnel due to Covid and lack of availability of skilled labour because most of the skilled personnel have either gone to their hometown or are not available,” Kanal Gupta, Director, United Drilling Tools TheSpuzz Online.
The association added that borrowers’ accounts which have been restructured in terms of RBI’s Circular dated August 06, 2020, February 11, 2020, or January 01, 2019, should really be provided an additional one-time chance for restructuring without having downgrading of asset classification, thinking of the two consecutive waves of Covid-19. “It is completely impossible for a restructured account to remain standard when there is a second state-imposed lockdown of 60 days and counting as there will be no cash flow during this period,” Rakesh Bajaj, Managing Director, Innovative Textiles told TheSpuzz Online. CIMSME also urged for a centralised loan application portal for the Subordinate Debt Scheme launched by the government last year as element of the Atmanirbhar package. According to the association, out of Rs 20,000 crore provision below the scheme, only about Rs 30 crore has been disbursed so far.