Small and micro industrial units that have not availed finance support from banks find themselves in a Catch-22 situation.

With the government making it clear that the relief package for MSMEs would be applicable only to the firms that had already obtained bank loans, a good number of micro unit owners, who hitherto had either managed with their own finance (with support from friends and relatives) or availed from private financiers, say they feel victimised.

“The banks refused to entertain our loan application, so we sought help from money-lenders and private financiers to run the business. They (read banks) were in denial mode. Now, the government has kept us out of the relief ambit, limiting it only to those firms that had availed bank finance,” said an entrepreneur, preferring anonymity.

Industry insiders, however, concede that banks have started knocking the doors of some of the larger (MSME) units, with the offer of additional loans.

“There is huge disparity,” echoed another entrepreneur, accusing banks of not considering the requests of the needy. “No doubt all of us are in need of support. But banks seem to have drawn up a list of beneficiaries; such unit owners are given a red carpet welcome, while many others are in the wait-listed category.”

“For instance, if the firm had availed a loan of less than ₹10 lakh, the unit owner would not have given any collateral. Such applications are either in the wait-list category or not entertained. I am sure that once they (bank) achieve their target, many of us would find ourselves in the lurch,” the gentleman added.

According to the owners of micro units (there are thousands of them in this region), an estimated 40 per cent had not availed bank loans.

While some of these are engaged in job work, there are quite a few manufacturing units as well.

J James, President, Tamil Nadu Association of Cottage and Tiny Enterprises, said that banks were refusing to give additional loan to such of those firms that had pending dues from earlier borrowings. “All of us, including unit owners, who were risk-averse and had therefore not borrowed from banks in the past, are in dire need of the relief package. Access to funds is becoming difficult by the day.”

Published on June 9, 2020