Telangana: Banks don't pause to help, put up struggling units for auction
Banks are not even attending the SLIIC meetings convened by the government.
Hyderabad: Banks are playing spoilsport in the revival of sick Medium, Small and Micro Enterprises. While the state government is coming forward to revive them, the banks are invoking the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and putting up MSMEs’ assets up for auction to recover their loans.
In Telangana state, there are around 45,000 MSMEs, of which 10 per cent have been declared as sick. Banks have categorised nearly 4,500 units as non-performing assets and have been putting their assets for auction, which is being strongly opposed by the managements of MSMEs, who argue that these units can be revived with the assistance of banks and state government.
The owners say MSMEs have the potential to provide employment to 24 people on an average for every Rs 1 crore investment made on them. The state-level Inter Institutional Committee comprising government officials from the industries department and banks has to take a decision on the fate of sick units.
It should explore all the possibilities for revival of such units and in case where there is no such scope, only then should they be declared as non-performing assets and banks be allowed to invoke the SARFESI Act. But unfortunately, the banks are not even attending the SLIIC meetings convened by the government.
Industries minister Jupally Krishna Rao told this newspaper: “The government has taken a serious view of banks invoking the SARFESI Act unilaterally and ignoring the decisions taken by Inter Institutional Committee. The revival of sick units should be the top priority and not sale of their assets. We will create a special fund with Rs 100 crore for revival of sick units.”
With 75 staff, firm faces sale for Rs 3crore
A decade-old foundry had borrowed Rs 8 crore from a bank and repaid Rs 5 crore. Due to the power cuts and increased tariff between 2009 and 2014, the unit ran into losses.
The management sought time to repay the balance and another Rs 3 crore to run the operations. It offered Rs 20 crore as collateral for the Rs 3 crore loan. It declared the unit as NPA and put its assets for auction.
“We provide employment for about 75 people. With Rs 3 crore, this unit can be put back on track. We have approached the government and banks for help but there is no positive response. The top priority should be to revive such units instead of declaring them as NPAs and putting their assets for sale,” said foundry unit owner M. Prabhakara Rao.
Bank doesn’t pay, puts unit on sale
The management of Lisa Life Sciences Pvt Ltd, a pharma unit, approached the bank for a loan. The bank agreed to sanction Rs 21 crore, but disbursed Rs 13 crore. The management had invested Rs 16 crore on its own.
“Just by infusing Rs 5 crore, the unit can be made functional. But the bank had sanctioned only Rs 13 crore out of the Rs 21 crore it had approved. Despite this, we mobilised Rs 16 crore on our own. The unit could not begin operations for the last five years because we need Rs 5 crore more.
Instead of coming to our rescue by sanctioning a Rs 5-crore loan, which it had already approved, the bank declared our unit as NPA and put our assets for sale. How is this justified,” asked Mr K. Koteswara Rao, owner of the unit.