Updated: March 7, 2022 11:08:17 pm
One of the features of the Act is that it provides an effective mechanism for mitigating the problems of delayed payments of micro and small enterprises. (Representational) Two years since the beginning of the Covid-19 pandemic in the country, the state of Micro, Small and Medium Enterprises (MSMEs) and other small businesses in Maharashtra continues to be precarious with rise in NPAs (non-performing assets) and outstanding dues recorded during the period.
As the pandemic hit both formal and informal businesses, MSMEs and other small firms were hit particularly hard with the double whammy of loss in business and increase in price of raw material. Raw material prices have more than doubled in the last two years, which has affected operating profits of the manufacturing MSMEs.
For firms and businesses in the service sector, the pandemic and restrictions had seen businesses evaporating almost overnight. But even as Covid-19 restrictions are being eased, business for smaller firms seem to be far from normal.
Experts say sector-wise NPA is a good measure of financial health of a sector. Thus, higher NPA means increase in number of instances of loan default, which can cause problems to businesses and banks.
The minutes of meeting of SLBC (State-Level Banker’ Conference), the apex body of bankers in the state, over the past three years point at a steady increase in NPA and outstanding for lending to MSMEs. Similar trend has been witnessed in case of MUDRA loans, the special lending programme aimed at providing loans up to Rs 10 lakh to small, non-corporate, non-finance firms and business.
On December 31,2019, NPA and outstanding for finances to MSMEs stood at 14.69 per cent and Rs 2.27 lakh crores respectively. MUDRA NPA and outstanding on the same date stood at 19.43 per cent and Rs 25,406 crore respectively. Both the parameters have increased during 2020-21 and 2021-22. Thus, on December 31,2020, SLBC’s minutes recorded 13 per cent NPA and Rs 2.66 lakh crore outstanding for MSMEs. On the same date, NPA and outstanding for MUDRA loans was 20 per cent and Rs 26,897 crore respectively. SLBC’s minutes of the meeting noted that on December 31, 2021, NPA and outstanding for MSME sector stood at 20 per cent and Rs 2.81 lakh crore respectively whereas MUDRA NPA and outstanding stood at 23 per cent and Rs 37,556 crore.
For MSMEs, government measures, including the Emergency Credit Line Guarantee Scheme (ECLGS), have failed to provide the relief they were expecting. While credit was extended, an unusual increase in cost of raw material such as steel and iron has seen margins being hit. For non-manufacturing businesses, the overnight stoppage of trade has seen incomes plummeting. Industry sources say this trend is sign of a deep financial distress in the sector, which can lead to many units going out of business soon.
Sandeep Belsare, president of Pimpri Chinchwad Small Scale Industries Association, said, “Just when things were getting normal, the escalating raw material prices have added to our troubles.”
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
