Kolkata, May 7 (KNN) In the Regional Consultation session organised on MSMEs’ access to finance and the delayed payment provisions of the MSMED Act, entrepreneurs were livid with criticism of banks for indulging in unfair practices.

MSMEs questioned the logic of getting their collateral securities assessed every year not by one but by two or three valuers at the time of annual renewal of credit limits and being forced to pay the fee of valuers.

“When an informed customer confronts, the banks reduce the charges or reduce the number of valuers from three to two, which itself shows that these are arbitrary fleecing tactics by banks”, said one of the participants.

The consultation was hosted by the Federation of Small & Medium Industries (FOSMI) in West Bengal and organised by Global Alliance for Mass Entrepreneurship (GAME) and Federation of Indian Micro and Small & Medium Enterprises (FISME), New Delhi.

One of the issues raised vociferously by MSMEs was the inclusion of Works Contract in the MSME definition. MSMEs engaged in works contracts (construction, repair, maintenance, installation, etc.) feel left out of the MSME benefits because their activities do not neatly fit into the current definition's categories. The current definition primarily caters to businesses that manufacture or provide services. Works contracts, while involving elements of both, are not explicitly covered.

A number of suggestions were forwarded by participants for amending the MSMED Act.

Officials from State Bank of India (SBI), Punjab National Bank (PNB) and SIDBI pointed out the demand side deficiencies. “The risk of failure is high for new entrepreneurs because of imprudent use of funds and lack of focus on core business”, remarked a seasoned banker.  

MSMEs, on their part, highlighted continued insistence by banks on collateral security and alleged that banks did not prefer CGTMSE-backed loans. They flayed the mindset of bankers who wanted business to run in a straight line and were not sensitive to the problems and difficulties business encountered.

“The smallest deviation from standard practice and banks impose penalties and assign accounts to SMA, turning a running business into a failed enterprise”, alleged a senior association member. 

Lack of access to Insolvency and Bankruptcy law was cited as one of the major reasons behind the new generation’s reluctance behind entering manufacturing. 

Many Plastic manufacturing MSME units demanded raising the turnover threshold for small enterprises from Rs 50 crore to Rs 100 crore, due to inflation of raw materials.  

GAME and FISME are holding regional consultations in Kolkata, Chennai, Bangalore and Mumbai. A national workshop is planned in New Delhi in June to present to the new government the findings of the consultations.

(KNN Bureau)