IMPACT ON SMES & RESPONSE BY LENDERS
The MSME segment took the hardest hit among all businesses due to the COVID-19 lockdown. While sales and revenue came to a standstill for many businesses, they are finding it hard to curb expenses, leading to a cash crunch. This has resulted in a stretched utilization of credit limits. Growth from fresh business has also been impacted. Challenges in the regularization of limits and recovery of repayment of dues have been temporarily offset by the moratorium measures taken by RBI.
SMEs employ around 40% of India’s workforce, which is an estimated 80 million people, who are given an opportunity for livelihood and employment via low-skilled jobs. In a way, they form the backbone of the Indian economy. The national lockdown clamped by the government from 25 March has brought down the shutters of about 48 million SME units in the country affecting the livelihood of over millions of workers. This has a double impact – on the repayment capacity of the SME units as well as on the workers’ income.
IMPACT ON BUSINESS & MORATORIUM
The moratorium for loan repayment introduced by RBI for 3 months initially which was extended for another 3 months has been to some extent a solace to the sector. But the continuous lockdown of the sectors for over 2 months now has posed more challenges to the sector like working capital requirements and labor non-availability since many of the workers had already left for their homes.
This story is from the June 2020 edition of Banking Frontiers.
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This story is from the June 2020 edition of Banking Frontiers.
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