The MSME Ministry will seek from the Finance Ministry higher withdrawal limit of Rs 2 lakh per week for small and medium enterprises to ease their cash crunch that has followed the government’s demonetisation of high value currency notes. “We are having a discussion with MSME associations and the suggestions that we have received such as increasing the withdrawal limit from Rs 50,000 to Rs 2 lakh, removal of penalties and interest, will be put before the Finance Minister and the Prime Minister,” Minister of State for Micro, Small and Medium Enterprises Haribhai Parthibhai Chaudhuri said on the sidelines of a conference organised by Assocham.
The weekly withdrawal limit for current accounts is Rs 50,000 at present. The minister also suggested to businesses to go in for digital transactions, observing “demonetisation will help to control the fiscal deficit”. Chaudhuri further said that the government is witnessing a new trend with many MSMEs taking the e-commerce route to establish themselves in the Indian market and they are using internet not only as a marketing tool but also as a tool to enable them to understand if a unique product has high demand in the market.
By adopting e-commerce, he said, MSMEs will achieve significant advantages such as increased revenues and margins, improved market reach, access to new markets, cost savings in marketing and communication spend, customer acquisition and improved customer experience. Meanwhile, an Assocham study on MSMEs has said the government must realise that the small scale sector will certainly move to e-payments.
It is important to acknowledge that money generated in business is not irregular, it said, adding that certain issues cannot be pushed so much that the system chokes and the outcome is distorted. Inadequacy of bank branches is one primary reason why cash dominates small businesses, it said.
“Many rural branches are open for just a day or two in a week. People consider bank postings in rural India as a punishment. The smaller the enterprise, the bigger the problem,” said the study. It said that irrespective of the bright side of upcoming GST, SMEs must be mindful of its accompanying challenges such as increase in complicate costs and alignment of IT systems with new processes. For SMEs, GST throws a mix bag of opportunities and challenges to explore, it added.