Coimbatore: Despite measures taken by the government to boost credit flow to micro, small and medium enterprises (MSMEs), banks continue to be reluctant to support the businesses.
According to data obtained from the District Information Centre (DIC), banks sanctioned loans to only 125 businessmen under the Unemployed Youth Employment Generation Programme (UYEGP), New Entrepreneur cum Enterprise Development Scheme (NEEDS) and Prime Minister’s Employment Generation Programme (PMEGP) till December even though DIC recommended as many as 636 of them for Rs 20.69 crore.
The number is significantly less when compared to the number of industrialists who obtained loan in the previous years. In 2019-20, loans under these schemes were distributed to 369 people and in 2018-19, to 310 people, data shows.
“Private finance companies demand a blank cheque when we approach them for loan. The interest rate depends on how bad we need money. If we need it immediately, they would even charge Rs 10 for every Rs 100, which is several times higher than the bank rate. We have no other option but to borrow from them as we have to pay salary to workers, electricity bill and building rent,” a foundry owner told TOI.
“When some businessmen failed to pay the interest due to the coronavirus impact, the financiers threatened them, visited their houses, humiliated them and filled a huge amount in the blank cheque and deposited it in the bank. They would file cheque bounce case against us to ruin our lives,” he added.
Another businessman said that the finance company from where he borrowed money has been demanding double the interest. “My business is in loss due to the sharp increase in raw material prices. In this situation, how will I pay the huge interest? I would not have been pushed to this situation if banks had sanctioned loan,” he said.
A businessman, who is making engineering components, said he had applied for a bank loan after the Covid crisis. “I am yet to get it. Bank authorities told me that as my company’s turnover is 50% lesser in 2020 than in 2019, it is difficult to process the application. In 2020, all companies were shut for three months due to the lockdown. It took me some months to pick up the pace due to manpower shortage.”
Unable to bear the humiliation meted out by private financiers, several businessmen shut shops and some took their own life, said J James, president of the Tamil Nadu Association of Cottage and Tiny Enterprises. “The government should take steps to ensure that banks provide us loans and streamline private finance companies,” he said.
Meanwhile, a private bank manager said that they have been sanctioning only collateral loans. “We would not be able to bear the loss if they fail to repay. Bank managers are wary because sanctioning collateral-less loans would put their career at risk if borrower fails to repay,” he said.