New Delhi, July 13 (KNN) Nearly 70 per cent of Micro, Small and Medium Enterprises (MSMEs) have approached banks for collateral-free loans under Emergency Credit Line Guarantee Scheme (ECLGS) to tide over the crisis following the coronavirus outbreak, a Care Ratings survey said. 

The survey also revealed that the majority of them intend to borrow less than Rs. 1 crore.

According to the survey, banks have so far sanctioned loans to around one-third of the applicants and the cost of borrowings is 8-9 per cent for most of the borrowers.

The rating agency said the survey was conducted over 2 weeks - between June 23 to July 7 - and saw the participation of 345 respondents from a cross-section of sectors.

The size of the business of the respondents in terms of turnover ranged from less than Rs 25 crore to Rs 100 crore.

The majority of respondents (over half) have availed moratorium from banks while fewer (27% of those it is applicable) have been able to do so from NBFCs, the survey said, adding that the lockdown has severely impacted the bulk of the respondents (over 60 per cent).

Fall in demand, contraction in cash flows, finance, labour shortage, logistical constraints and increasing receivables are amongst the main challenges faced by the segment due to the lockdown, the survey added.

Premier MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME) has, however, contested the survey results.

“The survey seems to have been administered on the Care rated SMEs which constitute a small elite group of MSME sector. Had 70% MSMEs approached for emergency funds, the Rs 3 lac crore fund would have been long exhausted. The fact that barely one third of the earmarked funds have been sanctioned and one sixth actually disbursed demonstrates that only a fraction of MSMEs have taken advantage”, says Anil Bhardwaj, Secretary general of FISME.

The Care survey shows that a third of the respondents have faced revenue losses of over 50 per cent in the last three months. Also, over 60 per cent of them have been unable to pay full salaries to their staff. However, only a quarter of those surveyed have retrenched their staff, it added.

Further, nearly half the respondents feel that they stand to benefit from the change in definition of MSMEs and a major part plan to increase their size.

The prevailing anti-China sentiment has not brought about noteworthy changes in terms of fresh business for the larger number of those surveyed, the study said.

In terms of assistance, the survey said MSMEs are seeking interest waivers, extension in moratorium, loan restructuring, tax cuts, financial support from banks and government, direct cash transfers, relief in electricity and water charges, among others.

As per the study, about 65 per cent the participants expect that it would take 12 months and more for their business to get to normal, and nearly half those surveyed expect their business situation to improve in the next 6 months.