Demonetization has thrown MSMEs out of gear: KASSIA

Bengaluru, Nov 11 (KNN) Hailing PM Modi’s bold step to demonetize 500 and 1000 rupee notes to counter the menace  of black money, industry body KASSIA has urged the Government to allow the banks to further permit the customers to withdraw money from their current and cash credit accounts.

Karnataka Small Scale Industries Association (KASSIA) has said that the step to demonetize 500 and 1000 rupee notes to counter the menace of black money, counterfeits and related issues of a parallel economy is indeed a bold decision which will hopefully yield good results in the coming days.

However, the association said that in the wake of demonetization, “MSMEs witness considerable confusion and dislocation in carrying out day to day financial transactions.”

It seems to have thrown MSMEs, particularly, micro and small enterprises into complete disarray.   The micro and small enterprises which by their very nature deal largely in cash for purchases as well as other transactions find it extremely difficult to cope in the absence of availability of ready cash in carrying their operations, KASSIA added.

The association said that the SMEs have also been facing difficulties in disbursing wages salaries due to this sudden dislocation.

“As many of them are not even allowed to draw their own money from the legitimate accounts in the banks due to the restrictions placed on withdrawals,” it added.

“We strongly urge that the Government must allow or banks must be permitted to allow customers to withdraw money from their current and cash credit accounts as these are legitimate instruments for transactions between banks and industry and business. Placing restrictions on such accounts for withdrawal is completely   uncalled for,” KASSIA President A Padmanabha has said.

The MSMEs have urged the Government to take immediate steps to ensure that the normal activity is not disrupted due to the logistical issues involved in supply and distribution of the new currency notes as this can cause considerable damage and loss to business operations.

This problem is more acute in districts and rural areas as people depend largely on cash for their day to day transactions including running their enterprises not to speak of the of the farm economy which is totally cash based.

“It is important to remember that the Indian economy is still largely 80% cash based with other forms of money barely making inroads as yet,” he said.

KASSIA has called upon the Government and the authorities to immediately take steps to improve the logistics of supply and distribution of new currency and also ensure that the unnecessary restrictions and hurdles are removed forthwith in the way of legitimate transactions and regular banking operations as such restrictions will disrupt industry and business to the determinant of the national economy.

 The uncertainties that are already emerging must not be allowed to become a logistical nightmare, the industry body added. (KNN Bureau)