Srinagar: The Reserve Bank of India (RBI) on Wednesday announced several relief measures regarding the Resolution Framework 2.0 for individual borrowers, small businesses and MSMEs.
The resolution framework will allow banks to offer a moratorium or revised loan repayment schedule to burdened borrowers. The scheme is similar to the Resolution Framework 1.0 was announced last year by the central bank to help retail borrowers struggling with loan repayments. The framework is applicable to Jammu & Kashmir as well.
According to RBI Governor Shaktikanta Das, “Borrowers i.e. individuals and small businesses and MSMEs having aggregate exposure of up to Rs 25 crore and who have not availed restructuring under any of the earlier restructuring frameworks (including under the Resolution Framework 1.0 dated August 6, 2020), and who were classified as ‘Standard’ as on March 31, 2021 shall be eligible to be considered under Resolution Framework 2.0.”
Ziraat Times engaged with J&K’s leading industrialists and businessmen to have their views about this new policy and how it could benefit, or not benefit, J&K’s industrial, mainly MSME borrowers, who are facing a liquidity pinch due to a spate of lockdowns. Here is the summary of the responses.
This plan is unlikely to provide benefit to big businesses in J&K
Mushtaq Ahmed Chaya (Leading businessman and parton PHDCCI, J&K)
This plan is unlikely to provide benefit to big businesses in J&K, especially those whose finance from banks is of larger quantum. This scheme has been launched in the middle of the second wave, when businesses are already vulnerable, especially big businesses. These conditions are not in our hand. The government should consider everyone and the conditions we are facing for many many years now, denting many businesses’ capacity to repay their loans with high accumulated interest.
Large industries of J&K do not stand to benefit
Mr. Shahid Kamili (President, Federation Chamber of Industry, Kashmir)
The loan restructuring 2.0 does not come up to my expectations. I wanted it to be for all, even the large businesses that have been hit equally by the lockdowns. So RBI should have laid out this scheme uniformly not only for MSMEs. In its current structure, it is mainly infrastructure-related and other small-scale industries like horticulture, agriculture, etc. – basically every small industry – especially local ones, which could be benefited most from it.
Given the spate of disturbed business years we have been facing for many years now, J&K needs at least 2 years of uninterrupted business and to settle down properly.
Don’t see the benefit of these schemes on the ground at all
Arun Gupta (President Jammu Chamber of Commerce and Industry)
This newly-unveiled scheme is not satisfactory. It cannot translate into relief for all businesses, especially those with larger finance volumes. In its current structure, while industry may get some benefit, but traders and hoteliers are not availing any benefit from it. Moreso, those businesses who have gone into loan default are not getting any benefit, their interest is not decreasing.
Our Finance Minister states that they have given Rs 3 lakh crore, but I don’t see the result of it anywhere on the ground. In short, this is not an effective plan.
There are so many accounts that are NPA in J&K today
Rahul Sahai (Chairman, PHDCCI, Jammu chapter)
This plan is not upto the mark at all, as the ceiling of Rs 25 crore leaves out a lot of businesses. In the case of J&K, business accounts are stressed from the last 12 years. First Article 370 was disposed of, and now the Covid lockdowns have led to long term suffering to businesses, making several accounts as NPAs. There are so many accounts that are NPA in J&K today. So we need a J&K specific plan for debt relief.
They have given Rs 50,000 crore for this scheme. For medical lines, hospitals, suppliers and patients some of the components of the scheme would provide relief to the affected patients of Covid19. But the plan should be broader and flawless. Today banks are giving loans to the people who are already in a comfortable financial condition. But what about those whose finances are already constrained? When a person and business has been badly affected by the conditions you have to see his need, not the balance sheet.
Not so promising for traders
Haji Mohammad Yaseen (President – KTMF)
Economic situation in J&K today is not good at all. Series of lockdowns are affecting traders and this reconstruction plan sounds not very effective for them. J&K’s traders and businesses pay Rs 1.47 lakh crore GST every year. This money from the business committee is crucial for government finances. Now, businesses need help.
This plan seems to provide some relief to small businesses but the big businesses hit by the lockdowns seem to be left out. The five percent interest subvention given to businesses last year was quite good. Businesses today need similar relief. This restructuring cannot bring cash flow in the market. It cannot give a boost to business sentiment.
The increase in moratorium is good but a 1-year extension will be better
Javed Ahmed Tenga (Businessman and Former President KCCI)
RBI needed to release such a scheme. The medical sector will be the most benefited out of it and will grow more. I was expecting more from the RBI regarding the travel and handicraft sectors because they are the most hit and there are no schemes for these sectors. The increase in moratorium is good but they also need to provide a 1 year extension as there was no export due to pandemic. I will request the government to intervene from a credit point so that NPA accounts get saved from becoming defaulters.
Health sector, manufacturers, and industries working for COVID are going to be the most benefited.
Nasir Shah (Chairman – Indian Association of Tour Operators (J&K Chapter)
The accounts which are standard till March 2021 and MSMEs will be benefited a lot from this. But this scheme is not up to my expectations because here we have approximately 1.2 lakhs accounts which have gone NPAs since the August 2019 lockdown. Those accounts won’t be benefited at all.
The Health sector, manufacturers, and industries working for COVID are going to be the most benefited. We know the government doesn’t have money but we are expecting something from them because we are suffering from long back especially the tourism sector and the wholesale handicraft sellers who earned mostly from the tourists. We don’t even see any revival for more than 8 months to 10 months.
This new restructuring plan is up to my expectations
Manzoor Ahmad Pakhtoon (chairman of Jammu and Kashmir Tourism Alliance)
This new restructuring plan is up to my expectations. Young ones who had just started up or are planning for a start-up will be benefited a lot from this. Being associated with the tourism sector, businesses like mine don’t get any benefit from any of these schemes because we aren’t considered as an industry or even as a unit. But others will be benefited and people in Kashmir don’t need loan restructuring they need waiving off and a 5 to 6 months grace period to recover and for proper production.
I believe this scheme will also help the loan defaulters but the government should work with the banks and ensure proper implementation of the schemes. It is like the center announces the schemes but at implementation levels, banks don’t implement them, and when questioned they don’t give any reason. RBI should eliminate the star rating system and release different schemes according to the level of rating, there should be uniformity.
