Banks are not willing to extend accommodative treatment to MSME vendors who default on their loan obligation because of delay in payment from their corporate buyers, said MSMEs
Banks are not willing to extend accommodative treatment to MSME vendors who default on their loan obligation because of delay in payment from their corporate buyers, said MSMEs
Anamul Rezwan from Pexels

“In the insolvency cases under IBC, dues owed to MSME suppliers are not given priority in the order of settlement of creditors’ dues. If MSME vendors do not get their dues settled on time, it is but natural that they will default on their bank loan obligation,” said Vijay Kalantri, Chairman, World Trade Center Mumbai at a webinar organised by WTC Mumbai and All India Association of Industries to mark International MSMEs day.

Kalantri said, banks are not willing to extend accommodative treatment to MSME vendors who default on their loan obligation because of delay in payment from their corporate buyers. He urged the government to bring provisions under the IBC Act for priority settlement of MSME vendors’ dues owed by the insolvent company,

In her remarks, Ms. Preeti Syal, Director, NITI Aayog informed, “NITI Aayog is working on setting up a Digital Capability Center to transform India’s manufacturing sector in this age of fourth Industrial Revolution. Already, NITI Aayog has enabled, under its National Strategy on Artificial Intelligence, Centers of Excellence through its various MedTech zones, special technology zones and via AIRAWAT, which is a concept of shared technology resources to facilitate MSMEs access cutting edge technologies such as 3D printing and artificial intelligence."

Syal also informed that various entities across Government of India, including NITI Aayog, Startup India, Invest India and Ministry of Commerce are working to streamline single window clearances for foreign direct investors in the country.

A senior official from Bank of Baroda informed, “We expect 10 percent overall credit growth in the core SME segment in the current financial year (FY22), compared to 11 percent growth seen in the previous year which was primarily backed by Emergency Credit Guarantee scheme (ECLGS).”

Highlighting the digitisation initiative of Bank of Baroda, the official said, “SMEs can get in principle sanction for their loan application up to Rs 5 crore by uploading their financial statements and other documents on our mobile app and internet banking and corporate web site. Bank of Baroda has introduced an end-to-end digitisation process for disbursing SME loans under supply and value chain finance. We have introduced automatic approval for MSME loan upto Rs 0.25 crores across India and loans up to Rs 5 crores is in-principally sanctioned digitally and we intend to sanction and disburse digitally loans shortly under co-lending model.

Jacob Anil Kumar, Director, Timescan Logistics suggested aspiring exporters to access potential overseas buyers’ data from National Resource Centre. He also advised MSMEs to avail of the Authorized Export Operator scheme, deemed export scheme, Direct Port Delivery/Direct Port Entry facilities to optimise their operations and logistics cost.

Jacob recommended MSMEs to make use of the free trade warehousing zones to store their exportable goods and get all export benefits from the government even before physical shipment of these goods.

In his introductory remarks, S Prakash, Founder, SEE Change, India, which provides consulting and turnaround strategies for MSMEs said, ”The pandemic has wiped out many small enterprises from the business. The working capital and receivable cycle, which was 90-120 days earlier has risen sharply since the pandemic. MSMEs are suffering from poor sales, rising inventory and liquidity stress. Amidst this liquidity condition, they have to procure raw materials and keep the manufacturing process going. Although the government has announced several relief measures, there is a huge gap between what is offered and what is needed. This has severely dented the confidence of MSME units.”

The webinar was moderated by S Prakash and attended by representatives of trade and industry, financial institutions, academia and consular corps.

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