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Wednesday, April 14, 2021

With low disbursal and high NPAs, not all is well with MSME sector in Maharashtra

Maharashtra banks are well on their way to miss meeting their target for the current financial year by a fairly large margin.

Written by Partha Sarathi Biswas | Pune |
Updated: March 3, 2021 3:47:57 pm
Pune tops in terms of employment generation, investment in MSMEsPune has emerged as the most preferred destination for Micro Small and Medium Enterprises (MSME) in Maharashtra, according to the state Economic Survey. (Representational Image)

Though it is considered to be the backbone of the industrial sector, the financial health of the MSME sector in Maharashtra is far from sound. With high NPAs and low disbursal of credit, the sector is staring at an uncertain future even though numerous schemes are being directed towards it.

Along with agriculture, housing and education, lending to the MSME sector also forms part of priority-lending portfolio of banks. At the start of the financial year, banks are allocated a target for lending to the MSMEs which they have to fulfil by the end of the year. This is like the agriculture banks which are expected to walk the extra mile to lend to these units which by far generate the maximum employment in the industrial sector.

However, Maharashtra banks are well on their way to miss meeting their target for the current financial year by a fairly large margin.

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As of September 30, 2020, out of the Rs 2,48,489 crore target for the current year, banks have managed to disburse Rs 90,081.15 crore — a measly 36 per cent. Banks, however, have declared 26.83 lakh MSME accounts as NPA with the outstanding amount being pegged at Rs 2,54,202 crore.

This high level of NPA coupled with low credit line availability, industry insiders say, is the biggest problem facing the sector even as India records positive industrial growth.

The central government has also extended a special credit line for the sector to help them deal with the Covid-related slowdown. But industry insiders say most of the interventions are not reaching the sector, which at present is facing the double whammy of inflated raw material costs and low credit line availability.

Most of the MSMEs, industry insiders say, work in informal sector and thus have fallen out of the gambit of institutional credit.

Prashant Girbane, director general of the Mahratta Chamber of Commerce Industries and Agriculture (MCCIA), blamed the lack of awareness among the banks and sector as a possible reason for the low offtake of credit. “Both the banks and the MSMEs should walk the extra mile to allow them institutional credit,” he said.

But what is more worrisome is the high level of NPAs reported in the sector. This, Girbane and others said, was an indication of the stress felt in the sector at large.

“Generally, around 10-15 per cent of the MSMEs go out of business every year but that is in the natural course of things. But the pandemic has dealt more serious blows to the sector. Our surveys have shown that the business pickup in this sector is slow,” he said.

What is necessary is a special boost to ensure the sector gets back to its feet in the next few months.

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