FISME takes up issue of increased claim period for bank guarantee with RBI

New Delhi, Aug 26 (KNN) The Federation of Indian Micro and Small & Medium Enterprises (FISME), a leading federation for MSME associations in India, has taken up the issue of increased claim period while issuing fresh loans with the Reserve Bank of India (RBI).

The RBI on Friday held the 48th Empowered Committee Meeting for MSMEs of NCT of New Delhi Region. Ashutosh Jatia, a Senior CEC member of FISME represented the federation in the meeting.

Talking to KNN India, Jatia said, FISME took up the issue of unilateral increase in claim period for bank guarantee.

While issuing a fresh Bank Guarantee (BG) or extending any existing one, Banks have increased ‘claim period’ of minimum one year from the date of expiry of validity period of the BG and charge accordingly.

Assessing the impact to be huge on MSME sector, FISME has been saying that MSMEs already suffer from high cost of BGs as Banks demand upfront margin money, then charges for period the BG is in use and more than 100% collateral against BGs.

It will have very adverse impact both on exports and large number of MSMEs supplying through tenders both to the Government as well as private agencies.

Stressing on the need for a uniform credit appraisal system.

Explaining in detail, Jatia said currently the credit rating in done by third party for the loans. “When a MSME goes for a loan to the bank, they are treated differently on the same parameters. The parameters being – interest rate, collateral, bank guarantee.”

He said, “There should be a point based system under which the applicants should be treated or given loans based on the points they get.”

Jatia, raising concern over slowdown, said amid slowdown in domestic demand the government should work towards boosting exports and linking the MSME sector with the global value chain.

There is concern or stress in the economy in the wake of slowdown in demand and slowdown in the economy overall. And with the global trade war, the experts feel there is more to be done by the government to improve business sentiments in the market and bring economy back on track.

The government on Friday announced a slew of measures like amending definition of MSME, ensure GST refund within 30 days, single water and air clearances for MSMEs etec. (KNN Bureau)