The Coimbatore Compressor Industries Association has sought interim increase in working capital limit for MSMEs as prices of basic raw materials, including copper, aluminium, and steel has spiked 30% to 80% in the last six months.
In a memorandum submitted to the Reserve Bank of India, the Association president M. Raveendran sought up to 20% of the working capital limits should be increased similar to the Emergency Credit Line Guarantee Scheme. Further, the working capital loans and advances extended to industries are currently subjected to annual renewal process involving enormous clerical works on both, bankers and industries.
This process involves repeated property valuation, auditor fees, and substantial renewal fees for MSMEs. The banks should adopt renewal process only once in three years, for MSMEs having working capital limit up to ₹1 crore.
If the interest principal payment is overdue for 90 days, the MSME accounts are classified as non performing assets. This should be extended to six months for MSMEs and bankers can issue a caution notice to the defaulter after 90 days overdue.
Whenever the RBI increases the Repo rate, bankers instantly hike the loan interest rate. But if the Repo rate is reduced, bankers are hesitant to lower the interest rate. The borrowers are unable shift to banks offering attractive rates as the expenses involved towards new processing fees, new mortgage creation expenses and pre-closure fees are high.
