MSMEs seek more sops from RBI

“For sanctions/ enhancement of limits for working capital/ term loans, the time limit for sanction may be fixed at 15 days from the date of application and for disbursement, the time limit may be fixed as 15 days from the date of sanction,” MSME representatives said.

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Collateral sought by banks should be limited to 133 per cent of the exposure rather than unlimited collateral, MSME representatives said.

Representatives of micro, small and medium enterprises (MSMEs) who met Reserve Bank Governor Shaktikanta Das on Monday sought more sops from the central bank to tackle the slowdown in the sector hit by demonetisation and implementation of GST.

They said collateral sought by banks should be limited to 133 per cent of the exposure rather than unlimited collateral. Personal guarantees should be taken only in the case of collateral shortfall and not where sufficient collateral is available from the firm’s resources. In the case of collateral shortfall, personal guarantees should be taken from Whole time or Executive Directors only and limited to 133 per cent of the exposure. The personal guarantees should not be taken from external Directors, who have no role to play in the day to day operations, they told RBI officials.

Shreekant Somany, Chairman, CII’s MSME committee, said standard rate of margin money for loans and bank guarantees (BGs) should be capped at 15 per cent. “If the bank guarantee issued by another branch other than the home branch of an MSME, often 100 per cent margin money is demanded. A standard procedure may be prescribed that the BG can be requested to be issued from any branch, likethe facility of any branch banking,” he said.

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The ban on Letter of Undertakings (LoUs) for buyer’s credit has impacted liquidity in the industry. “LoUs must be permitted in cases where the company is to incur capital expenditure. The RBI may allow banks to sanction buyers credit facility to MSMEs in cases where import of raw materials or components is done under Letter of Credit (LC) established by the bank. Conversely, LC on maturity should be allowed to be converted into buyers credit,” Somany said.

“For sanctions/ enhancement of limits for working capital/ term loans, the time limit for sanction may be fixed at 15 days from the date of application and for disbursement, the time limit may be fixed as 15 days from the date of sanction,” MSME representatives said.