Tag: micro

Punjab cabinet okays rules to promote and develop MSMEs, puts in place mechanism to mitigate delayed payments, BFSI News, ET BFSI

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LUDHIANA: The Micro, Small and Medium Enterprises (MSMEs) in Punjab have got a major impetus with the state cabinet approving rules to provide a well-formulated legal framework for their operations, with effective mechanism to mitigate the problem of delayed payments to such enterprises.

The Cabinet, led by Chief Minister Captain Amarinder Singh, on Friday okayed the Punjab Micro and Small Enterprises Facilitation Councils Rules, 2021 under Micro Small and Medium Enterprises Development (MSMED) Act, 2006, to facilitate promotion, development and competitiveness of MSMEs.

According to a spokesperson of the Chief Minister’s Office, these rules provide the first-ever legal framework for recognition of the concept of “enterprise” (comprising both manufacturing and services), and integrating the three tiers of these enterprises, namely Micro, Small and Medium. Apart from clearer and more progressive classification of each category of enterprises, particularly the small ones, the Act provides for a statutory consultative mechanism at the national level, with wide representation of all sections of stakeholders and with a wide range of advisory functions. One of the silent features of Act is that it provides an effective mechanism for mitigating the problems of delayed payments of micro and small enterprises.

All district level Micro and Small Enterprises Facilitation Councils established under the chairmanship of respective Deputy Commissioners across the State would ensure proper implementation of the aforesaid rules to ensure development of MSMEs in the State, and to resolve the issues of delayed payments effectively for betterment of Micro & Small Entrepreneurs under the Micro, Small and Medium Enterprises Development Act, 2006.

Notably, the respective Deputy Commissioner of these districts shall exercise the powers of the Director, Industries and Commerce, and shall be the Chairperson of the Council with Lead District Bank Manager of the concerned District as Members, besides two members from the association of micro or small Industry or enterprises in the state MSMEs as non-official members. The General Manager of District Industries Centre would be the Member Secretary.



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Heightened stress in retail, MSME segments due to Covid could weigh down banks, cautions Ind-Ra

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India Ratings (Ind-Ra) has cautioned that heightened stress in retail and micro, small and medium enterprise (MSMEs) could push out the banking sector’s inflexion point.

The credit rating agency also said that upward movement in yield curve could weigh down banks’ profitability.

Ind-Ra observed that safe bastion retail lending has fallen as pandemic drives higher delinquencies.

Indian banks to feel the effect of Covid second wave long after infections fade: S&P Global

In the case of MSME, notwithstanding the support in the form of the emergency credit line guarantee scheme (ECLGS) and restructuring, slippages could reflect from 2HFY22.

The agency noted that the agriculture sector has seen limited impact of Covid. The incremental stress addition from corporate segment has been at low levels.

Continuing systemic support

Ind-Ra, however, has maintained a stable outlook on the overall banking sector for the rest of FY22, supported by the continuing systemic support that has helped manage the system-wide Covid-linked stress.

It observed that banks also continue to strengthen their financials by raising capital and adding to provision buffers, which have already seen a sharp increase in the last three to four years.

‘Significant impact on profitability of Indian banking system’

The agency, in its “Mid-Year Banks Outlook”, has kept its FY22 credit growth estimates unchanged at 8.9 per cent for FY22, supported by a pick-up in economic activity post 1QFY22, higher Government of India (GoI) spending, especially on infrastructure, and a revival in demand for retail loans.

For FY22, the agency estimates the banking sector’s gross non-performing assets (GNPAs) at 8.6 per cent (against 10.1 per cent forecast made in February 2021) and stressed assets at 10.3 per cent (11.7 per cent). It expects provisioning cost for FY22 to increase to 1.9 per cent from its earlier estimate of 1.5 per cent.

PvSBs: market share gains

“Ind-Ra’s Stable outlook on large private sector banks (PvSBs) indicates their continued market share gains, both in assets and liabilities, while competing intensely with public sector banks (PSBs).

“Most have strengthened their capital buffers and proactively managed their portfolio. As growth revives, large PvSBs are likely to benefit from credit migration due to their superior product and service proposition,”said Karan Gupta, Director.

The agency’s Stable outlook on PSBs takes into account continued government support through large capital infusions (₹2.8 lakh crore over FY18-FY21 and further ₹20,000 crore provisioned for FY22).

The government’s support to PSBs has resulted in a significant boost in their capital buffers over the minimum regulatory requirements, significant improvement in provision coverage to 68 per cent in FY21 (FY18: 49 per cent), overall systemic support resulting in lower-than-expected Covid stress and smooth amalgamation of PSBs, Gupta said.

As per Ind-Ra’s analysis of the impact of a reversal in the long-term yield curve on the investment portfolio of banks, it expects an adverse impact on the profitability with a 100 basis points upward shift in the yield curve.

This could impact the pre-provisioning operating profit of PSBs by 8 per cent and that of PvSBs by 3.2 per cent while for the overall banking system, the impact could be 5.8 per cent.

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Tamil Nadu FICCI Chairman, BFSI News, ET BFSI

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It is estimated that in the first phase of the lockdown, the revenue shortfall was over 44% in Tamil Nadu’s Micro, Small & Medium Enterprises (MSME) sector and the extension of the lockdown could increase the revenue loss to 60%, said Dr. GSK Velu, Chairman FICCI TN State and Trivitron Healthcare Chairman & Managing Director.

He said the state has more than 6.89 lakh registered enterprises, accounting for 15% of the total MSMEs in the country and went on to add that the MSMEs in Tamil Nadu are caught in a peculiar situation.

“Apart from resulting in a severe shortage of working capital, the Covid-19 crisis had caused delays in payment, labour shortages, and disruptions in the supply chain,” he explained.

Velu said that the growth of healthcare manufacturing is very important for India’s economic development.He said the Indian healthcare sector is full of opportunities for medical devices and the diagnostic industry and Trivitron is one of the leading destinations that offer advanced healthcare devices, products, and facilities catering to a greater proportion of the population around the globe at the best cost without compromising the quality. The company focuses on “Make in India” which will accelerate the growth of the country’s manufacturing sector.

“Manufacturing will help in operational excellence, provide large-scale employment and this initiative will also enable a significant section of the population to get jobs and move out of poverty.

He said that through the Atmanirbhar Bharat Abhiyan, some favourable domestic manufacturing encouragement policies of the government, the domestic manufacturers stepped forward to make India self-reliant on medical devices.

“Not only Trivitron, as a medical device manufacturer but the whole industry and customers will get more relaxation and it will surely give a boost to manufacture indigenous medical devices. GST exemption is nothing but an incentive and reward for Indian manufacturers/Importers.” Velu said.

While speaking about the impact that Covid-19 has had on the lab testing industry at large, he said that the pandemic threw up a host of challenges.

“In the first phase of Covid-19, the only way to fight it is via boosting the testing, whereas in the second phase we got the vaccine to fight the Covid-19, but still the labs were on the front foot to diagnose the disease through RT-PCR and Antibody tests. So, lab testing has become very essential as we have experienced the need for more labs during the two waves. Trivitron has sold 55+ million Covid tests in the country,” he said.

He went on to add that the company is looking to increase its product lines by adding more products and technologies and is facilitating the development of custom-tailored products for developed, developing, and underdeveloped economies. Further, he said talks are on to cover the entire MENA region, which shall establish Trivitron as the only Health technology organization of Indian origin to cater to every country in the Gulf and Africa.



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TN budget historic, growth oriented: CII

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Confederation of Indian Industry (CII) on Friday termed the budget presented by the Tamil Nadu government as ‘historic’, ‘transformational’ and ‘growth oriented’ with thrust on ‘inclusive development’.

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Minister, BFSI News, ET BFSI

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Non-performing assets (NPAs) or bad loans of banks have declined by Rs 61,180 crore to Rs 8.34 lakh crore at the end of March 31, 2021, as result of various steps taken by the government, Minister of State for Finance Bhagwat K Karad said on Monday.

Scheduled commercial banks (SCBs) were carrying NPAs worth Rs 8.96 lakh crore on their balance sheet at the end of March 2020.

“Primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of SCBs, as per RBI data on global operations, rose from Rs 3,23,464 crore as on 31.3.2015, to Rs 10,36,187 crore on 31.3.2018, and as a result of Government’s strategy of recognition, resolution, recapitalisation and reforms, have since declined to Rs 9,33,779 crore on 31.3.2019, Rs. 8,96,082 crore as on 31.3.2020, and further to Rs 8,34,902 crore (provisional data) as on 31.3.2021,” he said.

Karad in a written reply to the Lok Sabha said COVID-19 Regulatory Package announced by RBI permitted lending institutions to grant a moratorium of six months on payment of all instalments falling due between March 1 and August 31, 2020, in respect of all term loans and to defer the recovery of interest for the same period in respect of working capital facilities.

Replying to another question, Karad said, gross NPAs of public sector banks (PSBs) peaked at Rs 8,95,601 crore on March 31, 2018.

As a result of Government’s strategy of recognition, resolution, recapitalisation and reforms, NPAs have since declined to Rs 7,39,541 crore on March 31, 2019, Rs 6,78,317 crore on March 31, 2020 and further to Rs 6,16,616 crore as on March 31, 2021 (provisional data).

“The net NPAs have displayed a similar trend, increasing initially from Rs 1,24,095 crore on 31.3.2014 to Rs 2,14,549 crore on 31.3.2015, Rs 3,24,372 crore on 31.3.2016, Rs 3,82,087 crore on 31.3.2017 and peaking at Rs 4,54,221 on 31.3.2018, and declining thereafter to Rs 2,84,689 crore on 31.3.2019, Rs 2,31,551 crore on 31.3.2020 and further to Rs 1,97,360 crore as on 31.3.2021 (provisional data),” he said.

Throughout this period, he said, PSBs continued to post aggregate operating profits of Rs 1,37,151 crore, Rs 1,58,994 crore, Rs 1,55,603 crore, Rs 1,49,819 crore, Rs 1,74,640 crore in the financial year 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 respectively.

“However, primarily due to continuing ageing provision for NPAs, they made aggregate provision for NPAs and other contingencies of Rs 1,55,226 crore, Rs 1,70,371 crore, Rs 2,40,956 crore, Rs 2,17,481 crore and Rs 2,00,404 crore respectively in the said years, resulting in aggregate net losses of Rs 17,993 crore, Rs 11,389 crore, Rs 85,370 crore, Rs 66,636 crore and Rs 25,941 crore respectively and returning to profitability thereafterwith aggregate net profit of Rs 31,820crore in FY2020-21,” he said.

At the same time comprehensive steps were taken to control and to effect recovery in NPAs, which enabled PSBs to recover Rs 5,01,479 crore over the last six financial years, he added.

In a reply to another question, Karad said overall credit growth of Scheduled Commercial Banks (SCBs) has remained positive for 2020-21 despite contraction in GDP (-7.3 per cent) due to the COVID-19 pandemic.

‘Gross Loans and Advances – Outstanding’ of SCBs increased from Rs 109.19 lakh crore as of March 31, 2020 to Rs 113.99 lakh crore as of March 31, 2021, he said.

Further, he said, as per RBI data of loans to agriculture and allied activities, micro, small & medium enterprises, housing and vehicle have witnessed a year-on-year growth of 12.3 per cent, 8.5 per cent, 9.1 per cent and 9.5 per cent respectively during the year.

Ability of PSBs to further increase lending is evident through Capital to Risk Weighted Assets Ratio which stood at 14.04 per cent as of March 31, 2021, as against regulatory requirement of 10.875 per cent, he added.



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U GRO Capital, Bank of Baroda in tie-up for ₹1,000-crore MSME co-lending

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U GRO Capital on Wednesday announced the launch of a co-lending partnership for micro, small and medium enterprises with Bank of Baroda.

Called Pratham, it is under Reserve Bank of India’s revised co-lending guidelines.

It is a ₹1,000-crore co-lending programme that will allow MSMEs to avail customised lending solutions at a competitive rate of interest with a significant reduction in turn-around time, U GRO Capital said in a statement.

U GRO Capital launches GRO Micro, adds 25 branches

The loan amount ranges from ₹50 lakh to ₹2.5 crore and will be offered at an interest rate starting from 8 per cent with a maximum tenure of 120 months.

Accessible at nine locations

“We believe that forging such partnerships is the way forward and collaborative efforts leveraging individual entities’ expertise are of utmost importance to take co-lending to MSME segment to the next level,” said Vikramaditya Singh Khichi, Executive Director, Bank of Baroda.

MSMEs including the recently added wholesale and retail traders under priority sector can avail credit through this programme, which is accessible at nine locations.

A call to preserve the ‘value’ of MSMEs at any cost

“The partnership is a reiteration of the value and trust that the bank places on our ability to leverage sectoral expertise and technology to solve the unsolved credit need of the MSMEs,” said Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital.

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External benchmarks: 28.5% rise in outstanding loans share

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The share of outstanding loans linked to external benchmarks increased from as low as 2.4 per cent during September 2019 to 28.5 per cent during March 2021, contributing to significant improvement in monetary policy transmission on the back of persisting surplus liquidity conditions, according to an article in the Reserve Bank of India’s monthly bulletin.

Notably, the outstanding loans (linked to both fixed and floating interest rates) in personal and micro, small and medium enterprise (MSME) segments accounted for 35 per cent of the outstanding loans as at end-March 2021, the article “Monetary Policy Transmission in India: Recent Developments” said.

Quarterly periodicity in re-setting interest rates for outstanding loans linked to external benchmark as against annual for MCLR (marginal cost of funds based lending rate) linked loans has contributed to the improvement in pass-through to lending rates on outstanding loans, opined RBI officials Avnish Kumar and Priyanka Sachdeva.

The article said monetary policy transmission is a process through which changes in the Central bank’s policy rate are transmitted to the real economy in pursuit of its ultimate objectives of price stability and growth.

External benchmark

RBI mandated all scheduled commercial banks (excluding regional rural banks) to link all new floating rate personal/ retail loans and floating rate loans to micro and small enterprises (MSEs) to an external benchmark with effect from October 1, 2019. This was extended to medium enterprises, effective April 1, 2020.

The external benchmark could be the policy repo rate or 3-month T-bill rate or 6-month T-bill rate or any other benchmark market interest rate published by the Financial Benchmarks India Private Ltd (FBIL).

Internal benchmark for pricing of loans

The authors emphasised that legacy of internal benchmark linked loans (Benchmark Prime Lending Rate, base rate and MCLR) – which together comprised 71.5 per cent of outstanding floating rate rupee loans as at March-end 2021 – impeded transmission. The share of loans linked to MCLR stood at 62.9 per cent as of March 2021.

“The opacity in interest rate setting processes under internal benchmark regime hinders transmission to lending rates, although the EBLR regime is indirectly also leading to moderate improvement in transmission to MCLR based loan portfolio,” the authors said.

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RBI to extend ₹16,000-cr special liquidity facility to SIDBI

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The Reserve Bank of India (RBI) has decided to extend a special liquidity facility of ₹16,000 crore to the Small Industries Development Bank of India (SIDBI) to support the funding requirements of micro, small and medium enterprises (MSMEs), particularly smaller MSMEs and other businesses, including those in credit-deficient and aspirational districts.

SIDBI can tap this facility for on-lending / refinancing through novel models and structures.

Also read: SIDBI launches quick credit delivery schemes to support Covid-19 preparedness

“This facility will be available at the prevailing policy repo rate for a period of up to one year, which may be further extended depending on its usage,” RBI Governor Shaktikanta Das said.

RBI had extended fresh support of ₹50,000 crore on April 7, 2021 to all-India financial institutions (AIFIs) for new lending in 2021-22. This included ₹15,000 crore to SIDBI.

With the new facility announced on Friday, the total liquidity support to SIDBI goes up to ₹31,000 crore.

Krishnan Sitaraman, Senior Director & Deputy Chief Ratings Officer, CRISIL Ratings, said: “The ₹16,000-crore special liquidity facility through SIDBI will provide some cash-flow relief to MSMEs and small borrowers through refinancing / on-lending.

“This will help beneficiaries recover and stabilise operations once the lockdowns start easing and the business environment improves.”

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U GRO Capital, SBM Bank India partner to launch credit card for MSMEs

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U GRO Capital on Thursday announced its partnership with SBM Bank India for the launch of GRO Smart Business credit card.

Powered by RuPay, along with EnKash, these are a range of secured credit cards specially designed for under-banked micro, small and medium enterprises, it said in a statement.

Also read: U GRO Capital launches GRO Micro, adds 25 branches

These can be availed by U GRO Capital borrowers against a fixed deposit (FD) with SBM Bank India.

MSMEs eligible for the business loans from U GRO Capital would be extended incremental funds to open an FD account with SBM Bank and the credit card would be offered against the security of an FD maintained by the applicant in his name, it further said.

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