The economic slowdown has hit the small and medium enterprises (SMEs) the hardest. Burdened by high interest rates, elongation of receivable cycles and lack of working capital is forcing several SMEs to down their shutters.
The promoter of a dairy food products company told The Indian Express that he had to shut his operations in February after 14 months in the business because of the bank’s delay in funding working capital.
“Due to the bank’s unprofessional approach, my repayment started even before I could begin commercial production and after 14 months of operations, I had to finally shut down my plant though my product was widely accepted,” said the promoter whose suppliers did not oblige as they would not accept delayed payments.
Further, the tight liquidity situation and non-availability of incremental bank funding is also leading to demise of several SMEs.
RBI data on sectoral deployment of gross bank credit as of April 2012 reveals that credit to manufacturing SMEs stood at Rs 2,61,890 crore, which is 6 per cent of the gross bank credit.
This figure stood at 6.8 per cent in April 2010 and has contracted since then. However in the same period the large industries’ share of gross bank credit rose from 31.3 per cent to 34.1 per cent.
According to Crisil there is a steep pyramid in the SME sector as 95
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