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Journalism of Courage
The economic slowdown has hit the small and medium enterprises (SMEs) the hardest. Burdened by high interest rates,elongation of receivable cycles and lack of working capital is forcing several SMEs to down their shutters.
Due to the banks unprofessional approach,my repayment started even before I could begin commercial production and after 14 months of operations,I had to finally shut down my plant though my product was widely accepted, said the promoter whose suppliers did not oblige as they would not accept delayed payments.
Further,the tight liquidity situation and non-availability of incremental bank funding is also leading to demise of several SMEs.
RBI data on sectoral deployment of gross bank credit as of April 2012 reveals that credit to manufacturing SMEs stood at Rs 2,61,890 crore,which is 6 per cent of the gross bank credit.
This figure stood at 6.8 per cent in April 2010 and has contracted since then. However in the same period the large industries share of gross bank credit rose from 31.3 per cent to 34.1 per cent.
According to Crisil there is a steep pyramid in the SME sector as 95 per cent of them are micro units,only 4.7 per cent are small units and just 0.3 per cent are medium sized units.
Very few companies that make it to the next level. A lot of them die at the micro level and get replaced as their business model is easily replicable, said Sachin Nigam,director SME ratings at Crisil. The reason why they are not able to scale up is because of lack of availablity of bank finance.
Crisil,which rates about 900 SMEs in a month said that the receivable cycle for a lot of them has gone up from 90 days to 120 days and in some cases it has even gone up to 150 days which has affected their financial condition.
