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No financial aid for SMEs - blame our outdated bankruptcy system!
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Bikky Khosla | 08 Jul, 2008
The unwillingness of banks to finance Small and Medium Enterprises (SMEs) saying they are risky, is actually also due to the dysfunctional insolvency and bankruptcy system in India that makes banks think twice before lending to SMEs.
It's not always that an entrepreneur succeeds in what he or she does. And it's quite understandable. Entrepreneurs who fail to learn from their first mistakes are more successful at the next attempt. However in India where one is used to carrying the proverbial white elephant on one's shoulders, an entrepreneur is given no second chance. He has either to succeed in his first attempt or else live in extreme conditions for the rest of his life.
Today experts and economists alike argue that since encouraging bankrupts to try again would contribute positively to economic growth, a fresh start for bankrupts should be promoted. They go on to say that measures to improve the chances of continuing or starting a new business include, removing outdated and harmful restrictions, disqualifications and prohibitions imposed on those subject to bankruptcy proceedings as well as early discharge from remaining debts, subject to certain criteria.
I have seen that in more cases than one, due to the dysfunctional insolvency and bankruptcy system in India for SMEs, it deprives the entrepreneur of an honourable exit nor does it give him a second chance to re-establish his business if he fails.
Interestingly, with the absence of an exit route, the SME is kept in a state of suspended animation till it is declared sick. The process still remains the most unethical and non-transparent.
Due to this obsolete regime existing in the country, neither the entrepreneur nor the creditors are benefited.
Banks who could take control of the assets and put them again into productive use are however caught in the web of paperwork and judiciary hurdles.
Because of these draconian laws, entrepreneurs, specially in the SME Sector, shun establishing bigger units and consider it not worth the trouble.
On the other hand, banks are further squeezing the credit flow to SMEs as they consider them more risky. And caught in this vicious circle are the SMEs who want to try and succeed. When will our laws be amended to fit into the 21st century scenario?
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No financial aid for SMEs - blame our outdated bankruptcy system!
V. Vannappa | Fri Jul 11 11:12:21 2008
After seeing this article I would share some of my feelings with you:
I am having a small scale industry and I had cash credit account with State Bank of India, Kallur and they never financed as per my proposal even though turn over there. They sanctioned only 20-25% of my funds requirement as per my proposal. I always crossed my proposed turnovers more than 20%. Because of this I borrowed money from private lenders and made my unit sick. After becoming sick I proposed for rehabilitation to which they never answered and forced me to settle for one time settlement which I opposed. While settlement they have not considered my payments after becoming of my account NPA and settled. As I came to know the actual NPA date, by that time I paid all the amounts due as per settlement. And I sent a my grievance to The Finance Minister under copy to The Governor, Reserve Bank of India, The Chairman, State Bank of India, The Nodal Officer, State Bank of India The Secretary, Public Grievance, Law & Justice, C/O Parliament of India, New Delhi and so many government agencies. No one helped me in this regard. At one stage Reserve Bank of India informed that it is not our duty to look in to this type of things. And finally I received a letter from The Asst. General Manager, SBI, Tirupathi stating that we are closing your file.
So I filed a suit in court of law to claim back my money to which the concern bank officials not filed counter affidavit even after one year of my suit.
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Re: No financial aid for SMEs - blame our outdated bankruptcy system!
Ashish Mirchandani | Tue Jan 27 18:07:08 2009
Hello,
I the undersigned person would like to introduce myself as the MBA from Mumbai University. I want to start my Small Bread Factory for which I need Financial Need. Can you suggest me some ways for getting it. My email id - ashish_28101985@yahoo.co.in
- Ashish Mirchandani
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I am suffering due to banking system
Sushil Bhatnagar | Thu Jul 10 12:34:30 2008
I took 12 lakh packing credit loan from Central Bank, I paid 6 lakhs and asked for balance to be paid in small instalments or some other system so that I can get some time to reorganise my exports business which had gone down.Instead the bank filed a suit in High Court attaching my 2 BHK flat. Again I paid 2 lakhs,but the bank won't relent.I am still fighting the case in the court.I meet the Senior Managers for compromise , they say we have your property , we are not bothered, we will take it.
When they want business "Customer is God" and when they have our property than "Customer is a Dog".
On one hand I am trying tosomehow get backmy business and on the other hand begging for money from near & dear one's to payoff the loans and save my property.
How inhuman this system can be. If it was not for my 2 small kids,maybe I would have committed suicide, so much pressure has been exerted by this bank people.
I wish someone would listen tomy cries.
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Re: I am suffering due to banking system
Ashish Mirchandani | Tue Jan 27 18:07:50 2009
Hello,
I the undersigned person would like to introduce myself as the MBA from Mumbai University. I want to start my Small Bread Factory for which I need Financial Need. Can you suggest me some ways for getting it. My email id - ashish_28101985@yahoo.co.in
- Ashish Mirchandani
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Re: I am suffering due to banking system
subhash | Thu Jul 10 14:14:05 2008
I can understand your woes.i have been thr' it.This is nothing that one should be afraid
of.If you want to save your house,you should tackle the Bank solicitors and the Bank manager.If you don't know how,you may pl contact me on sir_agn@yahoo.com or 9322269901 mumbai.My advise is FREE.
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SUPPORT FOR SME
RAJESH | Wed Jul 9 12:45:55 2008
I fully agree with the points and concerns raised by MR. Khosla that SME"s are deprived of right support and lot of changes in our laws is called for , likewise a change in the mindset of SME is also called for they are sme because of their thinking even if they grow they remain SMALL in their thinking instead of innovation and having a proactive approach they are beating around the bush , its a fact that our HONEST POLITICAL LEADERS AND CIVIL SERVANTS have ruined the COUNTRY and onslaught is on but before changing or expecting a change we have to change our attitude.
We are not small , we are LIKE MITTAL , THE STEEL MAN, RATAN TATA , and many more.
We have to see how they have imbibed the indian values and foreign expertise to their side and have shown the world that INDIA EXISTS AND INDIAN EXISTS AS WELL.
RAJESH
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Re: SUPPORT FOR SME
Ashish Mirchandani | Tue Jan 27 18:08:15 2009
Hello,
I the undersigned person would like to introduce myself as the MBA from Mumbai University. I want to start my Small Bread Factory for which I need Financial Need. Can you suggest me some ways for getting it. My email id - ashish_28101985@yahoo.co.in
- Ashish Mirchandani
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No financial aid for SMEs - blame our outdated bankruptcy system!
CSM Sundram | Wed Jul 9 09:52:16 2008
Dear Sir,
Read your article on financial aid for SMEs. It is very correct. On one side agricultural loans to the tune of thousands of crores are waived for those who do not pay electricity, do not pay income tax or care to pay back the interest or the loan money.
Not all the farmers are incapable of repaying the loans and this is a big burden on the banks who financed them. Whereas SMEs are threatened even for delayed payments and nor are they given payment holidays by the banks and financial institutions.
Why not the govt waive the loans of Small Entrepreneurs who are really in trouble and are desperate.
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Re: No financial aid for SMEs - blame our outdated bankruptcy system!
Ashish Mirchandani | Tue Jan 27 18:08:32 2009
Hello,
I the undersigned person would like to introduce myself as the MBA from Mumbai University. I want to start my Small Bread Factory for which I need Financial Need. Can you suggest me some ways for getting it. My email id - ashish_28101985@yahoo.co.in
- Ashish Mirchandani
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No financial aid for SMEs
Frode Mindreboe, Norway | Wed Jul 9 08:18:19 2008
Very interesting article. As a Norwegian trying to do some business in India and with a preference for SMEs, this explains a few things I haven't been able to realize so far.
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Re: No financial aid for SMEs
Ashish Mirchandani | Tue Jan 27 18:08:58 2009
Hello,
I the undersigned person would like to introduce myself as the MBA from Mumbai University. I want to start my Small Bread Factory for which I need Financial Need. Can you suggest me some ways for getting it. My email id - ashish_28101985@yahoo.co.in
- Ashish Mirchandani
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Re: Re: No financial aid for SMEs
milan m | Tue Feb 3 13:56:45 2009
u can apply for the Prime minister's employment generation programme(PMEGP) at nearest district headquater-District Industrial centre(DIC).they will guide u in this regards.ofcourse u should have a pukka project report.try ur best.God bless U.
milan.mac@hotmail.com
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Re: Re: Re: No financial aid for SMEs
Poor Indian | Sat May 30 12:54:54 2009
Hello Milan, please change your mind. Your suggestion is right but it is not possible in india, Just think something about PMEGP.
Plan commenced from 01.04.2008;
approved by higher officials in Aug'2008;
total amount sanctioned for the year is 823 Crores;
But the first meeting is held on 31.12.2008 & second one is feb'08 last.
only 2 meetings and very few number of projects are sanctioned(likely 10-15%);
that means not more than 100 crores;
for 4 years nearly 4500 crores are sponcered by MoMSME;
This situation is continued only 500 - 800 croers are used;
but the total advertisement and official benefits are used fully by the officials and blame no one can interest to get this loan;
but the truth is officials and bankers are don't give any response to the peoples and they will provide this money to their friends and relatives also thieves.
This is what happening in every indian schemes; it's better to stop schemes like this;
Every application filed under this scheme is only noticed after 6 months; This is a guidelines for PMEGP.
Very poor work by the govt. Staffs and Bank staffs is lead this scheme to failure.
I'm sure 15 years scheme PMRY is also failed in many states;
this scheme is also failed in every state it is sure, because of corrupted and irresponsible govt. Employees.
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Re: No financial aid for SMEs
subhash sirur | Thu Jul 10 14:08:10 2008
Mr.Frode, Not all entrepreneurs face the problem of finance for SMEs.But the problem arises when rogues and habitual offenders take advantage of easy finance to enrich themselves and leave the banks holding a dud cheque. It is imperative that proper checks and balances are put in place to ensure that right use is made of the monetary help that is extended by financial institutions.I was into textile trading and garment exports and I had to surrender my house and sell all my properties to pay off the Bank and creditors,after my business took a plunge,which left me and my family without a roof over our heads.I did something which very few entrepreneurs would do i.e bring your family on to the streets,instead of declaring insolvency after keeping the properties safe from creditors.I thought that my wife and I would restart business with the help of financial institutions given that we had the expertise and the will to succeed.But,no financial institution was ready to lend considering that we had lost everything.If we had kept our properties and liquidity safe by being dishonest,we would have received a red carpet welcome from the institutions.However,no regrets for being honest.That is my asset.Now,that world is flat,maybe we will work out our own roof over our heads.k.rgds, subhash sirur Mumbai sir_agn@yahoo.com Do let me know about yourself.
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Re: Re: No financial aid for SMEs
ashwin | Thu Jul 10 14:40:05 2008
You hit the nail on the head Bikky, the biggest obstacle in the first place is to get a loan, believe me you will age 10 years faster, and we for one have never defaulted on loans, no bounced checks, no issues what so ever last two decades. Getting a OD first with Union Bank was total waste of time despite being very good clients for 6-7 years, we changed to PNB and really had to fight,despite having parked collateral with the bank.If yu can do a 'inside' deal things are easy, thats the holy truth.And it are these insider deals which makes us honest folks suffer, it would be interesting to have some stats as to how many defaulters got away with huge loans despite all bogus collateral's and hanky panky agreements. I am sorry to say some things will never change in India....have a look at the Co operative banks esp in rural India and you will see what I mean.Who are the patrons, the politicians of course and who are the borrowers, the politicians or their cronies!!
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