This story is from January 30, 2020

MSMEs seek easy loans, low interest rates to rev them up

Ahead of the Union budget to be tabled on Saturday (February 1), micro, small and medium enterprises (MSMEs) in the district said they wanted the Centre to help facilitate them easy loans, while stimulating industrial growth and bringing the sector out of the present slump.
MSMEs seek easy loans, low interest rates to rev them up
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COIMBATORE: Ahead of the Union budget to be tabled on Saturday (February 1), micro, small and medium enterprises (MSMEs) in the district said they wanted the Centre to help facilitate them easy loans, while stimulating industrial growth and bringing the sector out of the present slump.
Pointing out that banks and non-banking financial companies (NBFCs) were apprehensive about sanctioning them loans, they said the sector should be provided loans through friendly processes and at a reduced interest rate.

R Ramamurthy, president, Coimbatore District Small Industries’ Association (Codissia), said while the interest rate for them was around 9%-9.5%, it should be brought down to below 7% or should be on par with that for agriculture sector. “NBFCs are charging an interest of 15%-17%, which is too high. This also should be brought down. It would be enough if the difference in interest is around 2%-3% form that of banks,” he said.
J James, president, Tamil Nadu Association of Cottage and Micro Enterprises, said they wanted the interest rate on bank loans to be fixed at 5%, as several micro units were pushed to the verge of closure due to economic slowdown. “For the defaulters, penalty should be waived off and the deadline for repaying them should also be extended.” He said there has to be new policies to introduce schemes to develop industrial parks and startups.
Another demand that representatives of Coimbatore Tirupur District Micro and Cottage Entrepreneurs’ Association (Cotma) put forth was to increase the working capital loans to 40% of the firm’s turnover from 20%. They have shot off a letter to prime minister Narendra Modi in this regard. Ramamurthy said only if they were given a working capital loan of 40%, they would be able to meet the fund requirement to stay in the market and take care of GST payments. They also wanted subsidiaries on machineries to be increased to 25% from 15%.

Presently, the debt-service coverage ratio (DSCR) parameters, based on which banks assess the ability of a firm to repay debts, are the same for both big corporates and MSMEs. “This should be changed. DSCR should be flexible and suit MSMEs. A feasibility study of MSMEs should be carried out and fix DSCR accordingly.”
Industrialists said the Centre should also stimulate the economic situation by creating demand for industries. “For this, the Centre should quicken the infrastructure projects worth ‘102 lakh crore’ that it had promised. This would spur activities at all levels of industrial sector and help us tide over the slump,” Ramamurthy said.
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