MSMEs Seek Easier Credit Access, Relaxed Loan Norms at Pre-Budget Meet With Sitharaman

New Delhi: Micro, Small and Medium Enterprises (MSMEs) on Wednesday raised policy hurdles plaguing the industry in a pre-budget meeting with Union finance minister Niramala Sitharaman.

Stakeholders expressed concerns over challenges in credit flow, loan classification norms and regulatory measures that were becoming roadblocks in industry operations, the Financial Express reported.

They also asked for a moratorium on loan payments until a trade deal with the US was signed, the Indian Express reported.

MSMEs account for 30% of India’s GDP and employ over 110 million people.

Industry representatives asked the Union government to take corrective measures to help the industry’s stymied growth. According to the Financial Express, issues related to mismatch in cash flows – resulting in loans’ classification as NPAs – and Quality Control Orders (QCOs) impacting MSMEs were discussed.

Stakeholders pointed out that despite the central bank’s initiatives to improve credit availability, liquidity has been a persistent problem for the industry. The lack of access to cash is particularly challenging for businesses that depend on seasonal demand and for others whose payments may have been delayed by buyers.

The representatives also called for more relaxed regulations surrounding classification of NPAs, citing temporary mismatches in cash flow, which lead to their  loans getting classified as NPAs, in turn affecting their credit worthiness. Advocating for a more flexible approach, the representatives suggested that temporary financial stress should not immediately attract an NPA tag, the paper reported.

Increased compliance costs and operational hurdles due to growing QCOs was also discussed at the meeting. Representatives said that MSMEs lacked the resources to meet testing requirements on tight deadlines.

The sector has argued in favour of a phased or capacity-based approach regarding implementation of QCOs. Unresolved financial bottlenecks and regulatory challenges could hurt the sector’s growth, the paper cited experts as saying.

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