In June month of 2017, the government took away the status of MSME from about 8 crores wholesale as well as retail traders. Now, the Confederation of All India Traders (CAIT) has come forward and demanded the restoration of taken Micro, Small & Medium Enterprise (MSME) status from these traders who are part of the service industry. In this article, we will discuss CAIT demands restoration of MSME status for 8 cr traders.
CAIT demands restoration of MSME
CAIT Secretary General told Press Trust of India that with removal in 2017, the wholesale and retail traders of the MSME category were forced to either from informal financial sources or borrow at a relatively higher rate.
Moreover, as per a report from banking sources, at the end of March annual assessment for closure, the risk of losing about INR 3 lakh crore loans given to them. With this loss, the tag of the MSME loan will also be lost.
As a result, it seems very unlikely to meet the target set by Priority Sector Lending (PSL) for those banks who lend a sum of INR 3 lakh crore. However, this shortfall will have to pull up with Micro Units Development and Refinance Agency Limited (MUDRA) or Small Industries Development Bank of India (SIDBI).
Guidelines by Central Government
According to the guidelines of the RBI, the extension of 40% of the total lending should be offered by commercial banks towards the Priority Sector Lending (PSL). However, the Priority Sector Lending target is about 75% for the Small Finance Banks (SFBs) and Regional-Rural Banks (RRBs). Moreover, the loans given to the MSME and Agriculture sector fall under the PSL.
The objective of PSL is to provide loans to this labour-intensive business at a concessional rate to promote the economy.
As per the estimation, both ICICI and State Bank of India (SBI) will have to reclassify about INR 25000 crore and INR 50000 crore respectively loans given to traders at the end of March 2021.
Moreover, CAIT Secretary General Mr Khandelwal also added that after the revision in the definition of MSMEs, Udyam Portal (which was launched in July 2020) has also denied giving MSME tag to retail and wholesale traders.
As a result of having no tag as MSME, many formal sources have denied the loan approval application. Apart from this, the Government e-Market (GeM) platform has also denied their registration application, he also added while addressing PTI.
Moreover, he also added while addressing PTI that the government has yet to decide on making requisite changes and slowing down the process of greatest economy formalisation. Adding, he said, this is the right time for the government to take the right decision as the large chunk of business is not in a formal system because of the absence of supportive policies.
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