New Delhi, Jan 31 (KNN) The Economic Survey 2016-17 presented in the Parliament today accepts that a relatively small number of Companies are responsible for the high NPA in the Banks.

The Survey presented by the Union Finance Minister Arun Jaitley also mentions that due to the high NPA, Banks squeezed release of loan to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs).

The survey mentions that the stagnancy in credit to the vital sectors reached a level unseen over the past two decades.

In fact, citing the Reserve Bank of India (RBI) data the MSME sector is trying to draw attention of the Government to the issue of near negative growth of bank loan to the sector.

To complicate the situation further, the Banks propped on the SMA rating guidelines of RBI, to throttle out even the routine financial transactions of the MSMEs.

The Special Mention Account (SMA) rating of MSMEs, conceptualised by the earlier Governor of the RBI, Dr Raghuram Rajan, was utilised by the Banks towards early closure of the MSME accounts.

While the  Economic Survey accepts ‘that since large debtors have many creditors, with different interests’, the Banks are not ready to accept temporary cash flow problems faced by a large number of MSMEs due to the failure of these large buyers.

So, utilising the SMA classification, Banks restricted credits to MSMEs, even for default in repayment for a month.

While the Survey suggests about a centralised Public Sector Asset Rehabilitation Agency (PARA) that could take charge of the largest, most difficult cases, experts doubt the success of the approach.

Commenting on the recommendation, a senior functionary of FISME, the apex MSME federation commented that how a PSU, already known for their inefficiency and poor performance will be able to tackle these huge loans,  will remain a big question. (KNN/ DB)