Over 70% of those who have availed loans are not in a position to repay their dues
With the loan moratorium period coming to end on August 31, MSMEs across Tamil Nadu are worried that they might not be able to make payments on time and may end up being deemed non-performing assets by banks.
Association heads of industrial estates and entrepreneurs whom The Hindu spoke to indicated that over 70% of them who had availed loans were not in a position to repay their dues. They are looking to the Reserve Bank of India (RBI) for a direction clarifying whether the moratorium would be extended.
“Almost 75% of medium and small enterprise owners and salary class individuals are badly in need of an extension of the moratorium till March 2021,” said K.E. Raghunathan, convenor of the Consortium of Indian Associations (CIA). He explained that the market conditions had not improved since June, and in reality, job losses have been on the rise, showing higher economic shrinkage.
“Many entrepreneurs are unable to pay even salaries and meet other commitments, including provident fund, ESI, IT, GST, rent and electricity bills, which are due next week, due to unpredictable market conditions, restrictions by local governments and drained cash flow situations. The RBI must consider the factual situation and extend the moratorium till March 31, 2021,” he said, adding that a decision had to be made immediately to save industries from becoming defaulters.
According to R.G. Chakrapani, secretary, Thirumazhisai Industrial Estate, as of now, business has not picked up, and most companies will not have sufficient funds to pay the bank liabilities. “Even if business starts picking up from September, almost all of the funds of the companies would be used for the repayment of bank liabilities rather than for actual business execution. The moratorium has to be extended for a few more months as the continuity of the lockdown in many places is adversely affecting logistics, customers and suppliers, and ultimately affecting business,” he noted.
At the Thirumazhisai Industrial Estate, businesses linked to agricultural products, medical equipment and the auto sector have been showing signs of improvement. But Mr. Chakrapani said restoration of normalcy would take a minimum of one year, and would happen gradually.
Kakkalur Industrial Estate Manufacturers’ Association (KIEMA) secretary K. Baskaran said units had not started full-fledged business activities, and another six months was required to repay all loans. “It would take another four to six months for MSMEs to bounce back, depending on the manpower,” he said.
K.V. Kanakambaram, president, Industrial Estate Manufacturers’ Association, Guindy, said many banks had started putting out auction notices. “Banks should stop the auction proceedings till the coronavirus pandemic situation normalises, and arrange the reopening/restarting of sick NPA units,” he said.