Sickness of SMEs

In recent years, the small scale (SME) units have been put to cruelty and grave hardship because of the introduction of scheme of classifying accounts into non performing assets (NPA). In 1997, NPAs of micro, small, medium, large industries put together stood at 15.8 percent of bank loans. In the same year, while the SSI sector was responsible for nearly one-half of the total number of NPA accounts, its share in the absolute amount of NPA accounts was about 20 percent. Thereafter, the proportion of NPA accounts started to decline due to the introduction of very stringent norms. It declined to 10.7 percent 1999-2000 and thereafter it showed a continuous decline and stood at to 2.4 percent in 2008-09. But recently there has been an enormous increase in the number and volume of NPA accounts. The NPAs of the Indian banking sector increased to 2.40 percent in 2010-11 and increased further to . 2.94 in 20011-12. In absolute figures NPAs have almost doubled during 2009-2012, i.e. it increased from about Rs.56,300 crore in March 2008 to about Rs.117,262 crore in March 2012. And assets under reconstruction had trebled during the same period. But for the restructuring of corporate sector bad loans amounting to Rs.2.0 lakh crore in the last two years the banking sector would have witnessed an enormous surge in the volume of NPA. According to figures provided by RBI many corporates have gone for second restructuring, which shows that the situation is becoming more serious. Experts feel that applying certain common norms to classify the accounts as NPA for all categories of industries, viz. large, medium, small, and micro units, is illogical and unreasonable. To treat a micro industrial/business unit together with large scale units is sheer imprudence and ramification of neo-liberalism. The current practice of classifying industrial units as “non- performing,” if interest or installments of principal due remain unpaid for more than 90 days has caused grave hardship and untold sufferings to the small scale entrepreneurs across the country. So they have been clamoring for relaxation of norms for NPAs and extension of time limit for repayment of loans from the present 90 days to at least 180 days, following the ongoing global recession.5It has resulted in more and more SME units becoming sick and ultimately NPA in the absence of proper rehabilitation or restructuring of the SSI as in the case of the corporate sector. As a result, the SME units all over the country are in a fix, anticipating closure of their units any time either by themselves or by the banks.Reports show that sometimes the bank officers harass the borrowers even for flimsy and unorthodox reasons.