CHENNAI: Senthil Rajkumar launched his company Super Shaper as he felt there was a huge demand for boilers in the market. The company, which in its heyday had over a hundred employees, is now struggling to stay afloat. The bank that funded the venture has issued a notice to Senthil under the Sarfaesi Act as his company had turned into a Non-Performing Asset (NPA).

Just like Senthil, hundreds of micro and small enterprises in Tamil Nadu — a state popular for incubating small businesses —are on the verge of shutting down permanently. First, they were hit by a plunge in orders due to the subsequent lockdowns. Now, the moratorium on repayment of bank loans is set to end on August 31, after which many of these firms that cannot repay their debt would get tagged as NPAs.

Once the NPA stamp is fixed, the company would become ineligible to get more loans. Ergo, laws made to bring ‘wilful’ defaulters into account are now likely to push small businessmen, who are already on the verge of collapse, over the edge.  Anticipating such a move, the state government has, time and again, asked bankers not to issue notices to entrepreneurs during these testing times.

Many MSME owners are getting notices simply for taking possession of their assets after being declared as NPA. “We will convey this matter to the State-level Bankers Committee and the Reserve Bank of India through appropriate channels, and ask them not to issue notices to stressed units,” say official sources in the state government. 

Distress ‘boiling’ over for small businesses in TN

For Senthil Rajkumar, his boiler unit in Tiruchy is his only source of income. “I am getting big orders, but what can I do... I don’t have the funds to buy raw materials,” he says. The fund crunch came with the lockdown, when most orders that had been placed got cancelled. 

“I need Rs 50,000 a month to stay afloat. I take small orders worth Rs 50,000 to Rs 1 lakh per month, and hire contract workers to get it done,” he says. “It’s hand-to-mouth existence.” The dry spell has forced Senthil to sell all his valuables to keep his life and business going. 

“All I am left now with are my house and this industrial unit. Now, if the government deems my unit sick and takes it over, I have nothing left to survive.” 

The boiler-making units in and around Tiruchy have the same story to tell. They have been demanding a bailout package from the government, to help them tide over the distress. While the Centre did come out with a bailout package for MSME units struggling due to the lockdown, apart from other economic factors, and have turned sick since March 2018, it leaves aside boiler units that were dependant on BHEL for orders. “We want the package to be extended till January 2016,” says Senthil. 

“We are not asking for the NPA to be waived off. We only want a chance to get back in business.”

Government trying to help

The state government had formed a committee comprising representatives of associations and bank officials, to review the progress of extension of Covid relief package to MSMEs through banks. 

“The meeting, scheduled to be held on July 21, was postponed as only three representatives from the State Bank of India, Indian Bank and Indian Overseas Bank agreed to participate,” says Kanakambaram. 

He has now written to the RBI governor, asking for the director of RBI-Chennai region to be made a member of the committee.  He also appealed to the central bank to intervene as the banks were now issuing possession notices to the MSMEs.

What Tamil Nadu is doing to help MSMEs?

Emergency Credit Line Guarantee
 
In order to facilitate the Union government stimulus package to MSMEs, the State Level Bankers Committee was convened on May 30, with the CM presiding over the meeting. An additional loan to the sum of Rs 7,517 has been sanctioned.

Credit Guarantee Scheme

The scheme is valid for MSME units which are stressed, viz. Special Mention Account  (SMA-2 ) and NPA accounts as on April 30, that are eligible for restructuring as per RBI guidelines on the books of the lending institutions. 

COVID Relief and Upliftment Scheme (CORUS)

Under this scheme, loans upto Rs 25 lakh with 6 per cent interest subvention will be provided to the MSMEs without any additional collateral security. The loan is sanctioned within two days.