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From the Desk of the President

The year 2009 has come to an end which carried mixed feelings amongst the business tycoons and other personalities. The economy witnessed a slow but confident return to tracks after more than a year of recessionary  trend.

It is said that the happiness may not spread amongst the Indian even though the prosperity spreads due to the steps taken by the expert economists and the decision makers at the helm, until the governance improves.

The sings of growth are visible from the Annual Gross Domestic Product (GDP) which has improved from 1% in 1950 to about 8.9 % in 2009. The literacy rate is expected to grow from 65% in 2001 to about 80% in 2010. It is reported that 1% of the people are crossing over from Below Poverty Line (BPL) every year for last almost 25 years. The growth in population recorded in 1981was of 2.2% and this growth has dropped to 1 % in 2001. Per Capita Income has increased from Rs. 1,178.00 in Eighties to Rs.3,051.00 in the Fifty year of the current century.

Today India is the   fourth largest economy in the world and expected to overtake Japan by 2014 to gain the status of the third largest economy. The population of the Country has become a strong asset due to which 64% of the GDP is being consumed in India itself. Because of this reason our economy remained absolutely insulated from any recessionary downtrend. Our economy could comfortably withstand the volatility in the international markets occurred due to fall of many multinational world leaders.

It is said that the success story of India is led by the market forces as compared to that of China which is Government induced. As a result of this our businesses try to satisfy the needs of the Kings the Customers. In the bargain the public gets satisfactory quality products and the businessmen benefits from the enhanced business.

India can boast of matured democracy. Our democracy is very dynamic. We have considerably fair and honest elections at appropriate intervals. Our fourth pillar of democracy, the freedom of speech, is very strong which has resulted into a free and strong media including press.
The divestment from the Public Sector undertakings was a major decision due to which monopolistic approach of such units was curbed. May items were decontrolled and the import duties were drastically reduced. So also the direct taxes were brought down. A new a new regime of value Added Tax structure all over the Country was introduced and successfully launched. All this happened in the first decade of the new century.
It is said that by 2010 majority of the Indians will speaks in English and India will have the largest population speaking in English as compared to any other country. Therefore, in whichever way an Indian pronounces an English word or in whichever way the Indian frames a sentence in English that will be taken as the guideline by the others, including those who in invented the language.

Yes!!! We are proud of all this. But can we take similar pride in talking about good governance?

A survey reveals that one out of every four teachers do not attend the schools. Two out of every five doctors abstain from the Village Primary Health Centers. Less we talk about the electricity power problem, it is better. Power is in short supply all through the century. Similarly, is the problem of availability of potable water.

We had enviable judiciary and judiciary system a few decades ago. Today only a very few amongst the judiciary can be beyond any doubt. The bureaucracy that we have is tremendously intelligent but is every body clean? The crime rate was under control during the infancy of our freedom. Police were honest and faithful. Are they today? Before the Eighties our major problem was growth whereas we had proper systems but today we are growing, no doubt, but the systems are either compromised or are demolished.
We, therefore, need to concentrate on good governance. Our growth can be many folds higher if we attack certain issues like Caste system, Education for the large population living in village, Fiscal Deficit and concentrate at the same time on infrastructural development. We are, surely and steadily walking towards this goal. What is required is our participation in helping the Government to bring in best governance. Let us dedicate ourselves for this cause and make India the leaders in the world in every field.

As a first step let us all take a pledge that hereafter we will try and change our own attitude of accepting whatever that comes our way rather than invoking our rights in the right spirits without, in any way, jeopardizing our relationship with any one in the society. We all deserve a better environment commensurate with our standing and therefore it is our duty to help the Government to help us improve the standard of living of each one us.

WISHING ALL THE MEMBERS OF OUR CHAMBER AND THE READERS A VERY HAPPY HEALTHY AND PROSPEROUS 2010

 

Shreenath Deshpande


 
From the Desk of the Editor .....
Dear Friends,

THE YEAR 2009

In the year 2009 like every other year there are many events which have taken place in various fields having remarkable consequences. The most notable amongst them are the financial scams or economic offences. Thus we have harrowing tales of scams which shaking the very foundation of our economy. The sensitive public is numbed to read about the stories of these financial crimes of powerful people in general who have not even an iota of integrity or honesty.

The last decades has witnesses a spat of scandals particularly the financial ones which rocked the nation. There have been scams in the stock exchange, in various ministries at state and central levels, scams in public service commissions, scandals in the field of sports like cricket and worst of these is a stamp scam, the biggest in the history of independent India which is yet to be fully evaluated. Unfortunately there is no field left which can claim to be above board. Already the country has been listed in the most corrupt nations in the world and people of this nation have to suffer the humiliation of getting branded as a nation of dishonest people. It is ironic that the nation which is rich with religious and spiritual heritage is losing that covered status due to the insatiable avarice of powerful people in the public life.

In fact there are controlling mechanism to prevent frauds in the financial institutions, but these have proved to be ineffective in stopping the rot. There is a multiplicity of authorities to control frauds right from Reserve Bank to CBI, SEBI and Dept. of company affairs etc. apart from state vigilance agencies. However the methods employed by these agencies are time consuming and probably there is no coordination between them which helps the scamsters to carry out their cheating business with impunity.

What is the way out of this imbroglio? Should the people sit helplessly or do something to stop this rot? Should the responsible public leave these affairs to the governments courts and news media and remain Complacent ?  “It is said that eternal vigilance is the price of the freedom.” The citizens who think themselves as responsible have to come forward in individuals as well as social capacity to act with all their might. In fact a strong public movement to stem the rot is the need of the hour. In this fight for justice, various Chambers of Commerce can take lead along with the forces which are working to fight the corruption of different kinds, as the businessmen from an important segment of the public.

An all out war against scamsters is the only way to prevent the scandals in this country, and everyone of us expected to do whatever little he can, to avoid future damage to the democratic system in general and economy in particular. Let us hope that 2010 will be better in this respect than 2009.

Satish Tendolkar
Editor/Vice President

MSME - Economic Stimulus Package

Measures for MSME Sector

 As suggested by the Finance secretary during the video conferencing with bankers at Bangalore, the banks should issue a 'suo motto' letter at branch level, to .the existing MSB customers, highlighting various measure available such as providing additional financial assistance, restructuring of borrowal accounts, creation of sub-limits for corporate borrowers to take care of payment obligations of large corporate borrowers to MSEs and other relief measures where units are in distress.

RBI Measures
 Besides taking steps for increasing liquidity in the banking sector, RBI has taken initiatives for assisting the units under MSME Sector and issued instructions to Banks on the following lines -

(a) Banks were advised to consider restructuring the dues of SMEs where warranted and also continue to disburse. loans against the sanctioned limits. [DBOD.No.BP.BC58/21.04.048/ 2008-09 dated October 13, 2008]

(b) Prudential guidelines on restructuring of advances which harmonises the prudential norms over all categories of debt; restructuring mechanisms (other than those restructured on account of natural calamitier;). [DBOD.No.BP.BC.37/ 21.04.132/2008-09 dated August 27, 2008].

(c) To face the problems arising out of the current economic downturn, as a one time measure, the second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal / consumer loans) up to June 30, 2009, will also be eligible, for exceptional regulatory treatment. [DBOD.No.BP.BC.No.93 /21.04.132/2008-09 dated December 8, 2008].

(d) RBI vide its circular .No. MPD.BC.309/02.01.009/2008-09 dated November 3> 2008 introduced a special refinance facility under Section 17(3B) of the Reserve Bank of India Act, 1934, under which scheduled commercial banks (excluding RRBs) are provided refinance from the Reserve Bank equivalent to up to 1,0 per cent of each bank's NDTL as on October 24, 2008 at the LAP repo rate up to a maximum period of 90 days. Banks have been encouraged to use this facility for the purpose of extending finance to micro and small enterprises vide circular No. MPD.BC.311/02.01.009/2008-09 dated November 18, 2008.

(e) Banks have been advised to contribute an aggregate amount of Rs. 2000 crore to the Micro, Small & Medium Enterprises (MSME) (Refinance) Fund with SIDBI in advance on the basis of the banks' projected shortfall in achievement of sub-target of 10 per cent for lending to Weaker Section category as on the last reporting Friday of March 2009.

(f) RBI has provided a refinance limit of Rs.7000 crore to SIDBI for incremental on lending to the sector directly and through banks, NBFCs arid SFCs.

Further,  in  terms  of RBI circular  IECD/5/08.12.01/2000-01  dated October 16, 2000 (reiterated on May 30, 2003, vide circular No. IECD.No.20/08.12.01/2002-03):

(i) While sanctioning/renewing credit limits to their large corporate borrowers (i.e. borrowers enjoying working capital limits of Rs. 10 crore and above from the banking system), banks were advised to fix separate sub-limits, within the overall limits, specifically for meeting payment obligations in respect of purchases from SSIs either on cash basis or on bill basis.

(ii) The size of such sub-limits to be decided taking into account the projected purchases by corporate borrowers from the SSIs during a year in relation to their total purchases and other relevant factors.

(iii) Further, with a view to ensuring availability of adequate balance in the 'account for meeting the payment obligations to SSI units, banks were advised to ensure that sale proceeds/other receipts of the borrower are credited to this account on a pro rata basis.

* Banks were also advised to closely monitor the operations in the sub-limits, particularly with reference to their corporate borrowers' dues to SSI units by ascertaining periodically from their corporate borrowers, the extent of their dues to SSI suppliers and ensuring that the corporates pay off such dues before the 'appointed day' /agreed date by using the balance available in the sub-limit so created. The instructions provided that if, at any time, the sub-limit is exhausted there is no bar on such payments being made from the other segment of the working capital limit. Similarly; if no payments are due to SSI suppliers, and the sub-limit remains unutilised/partly utilised, banks were free to allow their corporate borrowers to operate this limit for meeting other working capital expenses.

* The above instructions, mutatis mutandis, will be applicable to all MSEs to take care of payment obligations of large corporate borrowers to MSEs. Accordingly, 'appointed . day' will have the meaning as defined at Sec. 2 (b) of the MSMED Act, 2006. Banks were advised to adhere to these instructions meticulously.

* RBI has extended the period for implementing the restructuring package from 90 days to 120 days in respect of accounts covered under the circular dated 27-8-08.

* It was advised by RBI that the banks have to take up restructuring exercise on or before 31-1-09 [DBOD Cir.BC.NO.93 dated 8-12-08]. Now RBI, has decided to extend the date for this regulatory dispensation to 31-3-2009 [DBOD Cir.BC.No.105 dt 4-2-09].

SLBC-MSME

 The Chairman - SLBC informed the steps taken by Banks for expeditious implementation of the policy announced by RBI as under -

i. Sanctioning of ad hoc limits up to 20% of the limits with moratorium of 6 months repayable in one year,

ii. Reduction in margin for purchase of DG sets.

iii. The margin on book debts brought down and the time limit increased to 180 days

iv. Providing 2nd restructuring of the overdue accounts.

v. Setting up of MSME Care Centres at the Regional Office level for redressal of grievances. .

                     
vi. Encouraging coverage of more number of units under Credit Guarantee Fund Trust for Micro & Small Enterprises,

vii. Increase in the limit of coverage of collateral free loan from Rs.50 lakh to Rs.100.00 lakh

The Secretary, Industries & rommerce Department, GOK
 In regard to delay in payment from medium and large industries, he suggested that the MSEs have to make use of Industry Facilitation Council established under MSMED Act 2006 for realizing the dues from medium and large industries.

Action points emerged during SLBC
 Important action points that emerged from the special meeting are as under and banks were requested to furnish information on the compliance to SLBC -

a. Fixing of separate sub limit within the overall limit sanctioned to large & medium industries having working capital limit of Rs.10 crore and above, specifically for meeting   payment   obligations   in   respect  of  purchases   from   Micro   &   Small Enterprises.

b. FurnisMng of list of borrowal units where carving of sub limit has been exercised by Banks and to be reported to SLDC by 15-1-09.

c. Granting  of  additional  limits  to  medium  and  large  industries  to  meet  their commitments to Micro & Small Enterprises if required.

d. Accepting the latest, available property tax paid receipt in respect of properties offered as collateral by Micro & Small Enterprises at the time of granting fresh limits or renewal of limits in the case of Bangalore city properties,

e. The working capital limits sanctioned to Micro & Small Enterprises shall not be reduced wherever the value of the property comes down due to market conditions,

f. Wherever the additional limits are sought by the existing borrqwers under Micro &   ' Small Enterprises category, Banks shall consider such limits without insisting for additional collateral but may be .covered under the credit guarantee scheme of CGTMSE [as per extant guidelines].

g. Controlling Offices of Banks to conduct a Meeting with the borrowers under medium and large industries category to sort out the issues arising out of economic slow down which ultimately will benefit the Micro & Small Enterprises depending on payment from such medium & large industries.

h. The specialized branches of Banks catering to Micro & Small Enterprises sector shall convene a Meeting of the borrowers under MSME Sector to discuss the problem / issues and find a solution to such issues.

Measures for the MSME Sector issued by Indian Bank Association on 16-12-2008;
 Public Sector Banks have decided  to implement  the following measures  to  meet the immediate needs of the MSME customers:

a. Public Sector Banks will grant need based adhoc Working Capital Demand Loans upto 20 percent of the existing fund based limits in respect of units having overall fund based credit facility up to Rs.10 crore. The loan will be repayable in one year with a provision of moratorium of six months during which only interest will have to be serviced.

b. In the current stretched shipment and receivables situation resulting in elongated operating cycle of business impacting working capital requirement needs, banks will be pro-active and forthcoming in sanctioning adequate increase in working capital limits.

c. Relief will be granted by reducing margin on receivables. Further, receivables up to six months will be reckoned for book debt financing.

d. Cash margins on letters of credit/guarantee will also be relaxed based on needs,

e. Moratorium period will be extended in respect of loans availed by MSMEs where . project implementation has been delayed in the current scenario.

f. For units unable to repay term loan obligation on time, repayment will be rescheduled/rephrased on a case-to-case basis within the overall loan policy of the respective banks.

g. Finannce for purchase of gensets will be made available on soft terms.

h.    Banks will take up a second restructuring of SME accounts on a case-to-case basis.

i. Interest rates for borrowings by Micro Industries will stand reduced by 100 basis points for all existing and new loans with immediate effect. In respect of Small and Medium Enterprises where banks have fund based exposures up to Rs.10 crore, interest rates will stand reduced by 50 basis points with immediate effect.

The reduction in these rates of interest will be with reference to the rates of interest prevailing on 30.11.2008.

In addition to the above, each Public Sector Bank 'will also set up Regional MSME Care Centres to facilitate MSM Entrepreneurs for quick redressal of their grievances, The functioning of these Centers will be monitored directly by the Head Office and the list of these Centres will be posted on IBA portal and on the website of each public sector bank. These Care Centres would also be in close touch with the branches in their respective jurisdictions to ascertain the position on requests/presentations, in any, form, as may be received from any MSME.
*As MSME sector is one of the growth engines of the economy, Reserve Bank of India has taken the following proactive measures in a bid to alleviate the problems faced by the MSMEs.

 * Banks were advised to .consider restructuring the dues of SMEs where warranted and also continue to disburse loans against the sanctioned limits.

 * Prudential guidelines on restructuring of advances have also been issued which harmonizes the prudential norms over all categories of debt restructuring mechanisms.

 * To face the problems arising out of the current economic downturn, it has been decided that, as a one time measure, the second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal / consumer loans) up to June 30, 2009, will also be eligible for exceptional regulatory treatment. ,)

 * The Reserve Bank introduced a special refinance facility under Section 17(3B) of the Reserve Bank of India Act, 1934, under which scheduled commercial banks (excluding RRBs.) are provided refinance from the Reserve Bank equivalent to up to 1.0 per cent of each bank's NDTL as on October 24,2008 at the LAP repo rate up to a maximum period of 90. days. Banks have been encouraged to use this facility for the purpose of extending finance to micro and small enterprises.

 * Banks have been advised to contribute an aggregate amount of Rs. 2000 crore to the Micro, Small & Medium Enterprises (MSME) (Refinance) Fund with SIDB! in advance on the basis of the banks' projected shortfall in achievement of sub-target of 10 per cent for lending to Weaker Section category as on the last reporting Friday of March 2009,

 * In order that the problems faced by the MSB sector are addressed proactively by banks and steps taken for timely restructuring, holding on operations and additional facilities etc., RBI had reiterated the earner issued instructions on the monitoring of the sub-limits for the large corporates to take care of payment obligations of large corporate borrowers to MSEs. Banks are advised to adhere to these instructions meticulously
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