Coimbatore Industry Body Flags MSME Stress, Seeks RBI Support Measures

Demand for higher credit limits The association has proposed an interim increase of up to 20 percent in working capital limits for MSMEs, similar to the support extended under the Emergency Credit Line Guarantee Scheme during the pandemic, reported The Hindu. Highlighting procedural challenges, the body said the current system of annual renewal of working capital loans imposes a heavy administrative and financial burden on both banks and businesses. It has suggested extending renewal cycles to once every three years for MSMEs with limits up to Rs 1 crore and reducing repetitive costs such as property valuation, audit fees and renewal charges. Relaxation in NPA norms The association has also sought relaxation in asset classification norms. Currently, MSME accounts are tagged as non-performing assets (NPAs) after 90 days of overdue payments. It proposed extending this period to six months, with banks issuing caution notices after 90 days instead of immediate classification. Concerns over interest rate transmission The memorandum flagged concerns over asymmetric transmission of policy rates. It noted that while banks quickly raise lending rates when the RBI hikes the repo rate, they are often slow to pass on rate cuts to borrowers. To improve competition and borrower flexibility, the association recommended removal of processing fees for borrowers shifting to other banks and reduction of costs related to mortgage creation and loan pre-closure. The demands reflect growing stress among MSMEs amid rising input costs and tighter liquidity conditions. Industry representatives said timely policy intervention by the Reserve Bank of India could help sustain operations, protect employment and maintain industrial output in key manufacturing clusters like Coimbatore. (KNN Bureau)