The moratorium on the repayment of the term loan will end in August with non-performing assets in the micro, small and medium-sized enterprises (MSME) sector likely to grow, and such enterprises are expected to slash jobs in the coming month, a sector body has said.
Citing the survey results it was said that job losses could hit up to 45 million by August in the sector, one of the most severely impacted by the Covid-19 pandemic and the lockout.
The moratorium, which the Reserve Bank of India originally declared for 3 months in March and was then extended until August 31 is being extended, is being pursued by small businesses. The Federation of Indian MSME (FISMEs) also said that the sector could not use entirely the government package which was announced in the light of the pandemic, partially due to banks’ unwillingness to lend.
The survey carried out by Skoch Consultancy Services in collaboration with the FISME found that 61 percent MSMEs were not able to service loans from September. According to the survey of 400 small businesses from around the country, only 16 percent are qualified to support their loans.
“Fairly high NPAs are anticipated and now all term moratorium loans must be restructured,” the survey results showed.
Around 32 percent of MSMEs said they needed a one-year extension of the moratorium, while 37 percent needed a six-month extension. Around 16% said three months would be enough.
The sector ‘s work losses projections range between 25 and 30 million by the end of June. An extra 10-15 million will be missed by the close of August.
Roughly 56 % of respondents said that in June they did not get funds to pay extra remuneration, which was a small increase from 64% of those surveyed by the same body in April. Around April and June, however, there was an increase in the need to reduce salaries.
In June, up to 82% of the MSMEs surveyed required emergency funds compared with 68.6% in April, although 79% did not take benefit of the government’s loan guarantee scheme.
“Most MSMEs are awarded, with the kit of Rs 3 lakh crore meeting the demand of 19%,” said the survey. Banks have mostly provided loans to consumers with significant guarantees.
In May of this year, the Atmanirbhar Bharat package of loans free of collateral to MSMEs was declared by finance minister Nirmala Sitharaman.
In the absence of confidence to continue the business, MSMEs claimed that they require an urban job protection system similar to the MGNREGA Rural India program to be used for MSME salaries.
