With no hope for any action by the government and the RBI, the sick micro, small and medium enterprises (MSMEs) in Punjab are left high and dry. The industry alleged that the banks were flouting RBI guidelines. They alleged that the banks were restructuring loans of only a handful of MSMEs while subjecting others to recovery.
As of September 2018, the total number of declared sick units in Punjab is 7,198 and the outstanding amount is Rs 1,541 crore.The industry alleged that many of the banks have not formed a committee called Corrective Action Plan (CAP) Committee for distressed MSMEs, which is mandatory under the RBI guidelines to explore various options to resolve the stressed account. Industrialists alleged that the banks rather prefer recovery of loans than hand- holding the MSMEs for their revival.
The Committee comprises representatives of the bank, an independent expert and a representative of the state government. The intention behind forming the committee is to arrive at an early and feasible solution to preserve the economic value of the underlying assets as well as the lenders’ loans and to allow the enterprise continue with its business. During the period of operation of Corrective Action Plan (CAP), the enterprise is allowed to avail both secured and unsecured credit for its business operations.
The resolution plan may be of three kinds — rectification, restructuring and recovery. Under rectification, lenders are allowed to provide additional finance to the borrower. Under restructuring, the borrower’s loan repayment schedule is extended and interest rate reduced to ease the repayment pressure. In recovery, lenders pursue legal routes to recover the dues.
“Many of the banks are not aware of the fact that they have to formulate CAP committee to look into stressed assets. In the absence of the committee, the banks insist on recovery instead of reviving them,” Gurdaspur-based Amrit Group chairman Inder Sekhri said.
His food processing unit become operational in 2015-16 and a year after become a non-performing asset (NPA). “The total project cost was Rs 25 crore and estimated value of production calculated was Rs 200 crore. We were given working capital loan of Rs 3 crore instead of Rs 32 crore as per guidelines. We pleaded before the bank for additional working capital requirement, but they insisted on recovery,” he added.
Echoing similar sentiments, another Gurdaspur-based manufacturing unit owner said, “Our loan became NPA because our order was cancelled due to delay. We are in working condition but instead of hand-holding us, our bankers have initiated recovery.”
Bankers said they have a committee to look into the aspects of MSMEs’ viability.However, Gurdaspur Deputy Commissioner Vipul Ujjwal said, “The MSMEs approach me with their grievances citing the committee’s role. But, I have never heard of any such committee formed by the banks.”