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Late payment: RBI move not enough for SMEs
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Bikky Khosla | 26 Nov, 2013
Last week, the Reserve Bank of India announced that it would provide a Rs.5,000-crore liquidity support package to micro and small enterprises. The decision has been taken to help the sector get rid of liquidity tightness resulting particularly due to delayed settlement of receivables from -- in the words of the central bank -- "large corporate, Public Sector Undertakings and government departments". No doubt this is a welcome step, but I think it is too small to address the big 'late-payment' challenge faced by our small businesses.
When your customers pay too slowly, which is a common problem in the industry, a cash crunch is the likely result. In effect, you are extending credit, usually at a zero interest rate, to your customers, and when they delay in payment, which they usually do, your cash flow suffers, so much so that your small budget can hardly withstand this burden. Retailers might be immune to this problem, but if you are in business-to-business selling, you are sure to face this problem. Selling on credit has become a way of doing business -- if you say no, you are likely to lose the customer, if you say yes, you have to risk delayed payment or no payment at all.
What can a small firm do to respond to this lingering problem? According to some, following a credit policy is extremely important while some others view that it is tough to make firms sign on a legal document and so emphasize on broadening the customer base instead of depending only on a limited few customers. Factoring could be good solution, but it involves costs. At present, there are two acts: the Delayed Payments Act, 1998, and the MSMED Act 2006 to address delays in payment settlement, but they are toothless. Sometimes, voice is also raised for a full-power regulator to curb this malady, but such a solution seems far off at this moment.
I think, there is an urgent need to enact adequate laws which can curb the menace of this parasitic business practice, and the government should not continue lending a blind eye to the issue, particularly after the recent official admission of the severity of the problem by an authority like the central bank. In addition, our industry associations should come forward to offer their valuable suggestions to the government in this direction. There is no doubt that the RBI move is a welcome one, particularly at this time when both the manufacturing and services sector are facing the brunt of slowdown in the economy, but a permanent solution is more desirable.
In its announcement, the RBI adds that it has been decided to include, incremental credit, including export credit, to be extended to medium enterprises by the scheduled commercial banks, as eligible priority sector lending. This is again a welcome move. The medium-scale enterprise sector has been suffering no less than their smaller counterparts when it comes to lack of credit availability and high interest rates. In addition, as the sector contributes significantly to our exports, this will also help push our overseas shipments.
I invite readers' opinions on these developments.
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Non payment by Ballarpur Industries ltd
Ritesh SARAF, Director Gondwana Packers P ltd 9766338979 | Mon Oct 23 08:49:22 2017
We are suffering due to non payment from Ballarpur Industries of our dues of Rs27lacs plus interest from 18/6/15.Even after several reminders both verbally and in writing we are not getting any response .We are facing an acute financial crunch ours being a SSI unit. There is no responsible person whom we can approach with our plea. Kindly advise.
Delayed payments by top corporates
Bhagawath Prasad | Fri Nov 18 06:46:15 2016
All of us are aware that top corporates have had super access to banks money or public money , hence government must tell them to release orders with 40% advance and balance within 15 days of delivery is made,I am suggesting , in spite of knowing that these top companies will resort getting supplies done without POs and play with weakness of SME sector to their advantage.in my opinion ,few sincere buyers will follow the rule that will help 10% of SME sector. RBI intentions are good but 5000 crore is too small for the size of receivables for SMEs.
DELAYED payment from my buyer
Power Tech Equipments | Mon Nov 14 13:10:39 2016
We have sent a bill for Rs.2,12,000/- to M/s NTPC-SAIL Power Company Ltd, Rourkela on July,2016.We have not yet received payment. Sent reminders severel times. Pl.look into the matter.
DELAYED payment from my buyer
RAJ | Sat Nov 5 05:50:29 2016
Dear sir i am running a firm as SB Global infosoft. my MSME Regd :UAN-DL04D0000975. One of my client is not paying me after all work completed. we have send many mail call . But they are not giving any response . please guide , how you can help us for my payment protection.
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Re: DELAYED payment from my buyer
Power Tech Equipments | Mon Nov 14 13:09:11 2016
I have sent a bill for Rs.2,12,000/- to M/s NTPC-SAIL Power Company Ltd, Rourkela on July,2016.We have not yet received payment. Sent reminders several times. Pl.look into the matter.
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Delayed Payment
Er (Dr.) D S Tomar | Wed Sep 7 07:59:36 2016
We need speed in decision.A simple ordinance to limit payment time limit from date of invoice(say 60/90 days)and auto credit through bank account.In this case both must agree in P.O and this consent is expressed to banks(customer and seller). In fact bank may earn some discount.
MSMED ACT 2006
SAURENDRA RAUTRAY | Sun Sep 4 15:42:42 2016
Dear Members,
The effect of non or delayed payment due to SSI unit is like a cancer and govt had updated the earlier act to MSMED 2006 but this act being new people and judiciary are not much aware of it. But one should understand that it is way to faster than a normal Civil suit or suit for recovery.
A good competent lawyer can really work wonders in such litigation.
Saurendra Rautray
RAUTRAY & Co
www.rautray.com
09437008255
Non receipt of the payment and C.Forms
Anantha Rao | Tue Jun 7 09:49:46 2016
We are a small scale industry, Big corporates are not paying in time and not submitting C Form and Form I, which resulted in penalty, interest and differential tax to be borned by us. We have buy major RM By paying advance money. Please suggest us where you have to approach to solve this issue.
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Re: Non receipt of the payment and C.Forms
Saurendra Rautray | Sun Sep 4 15:36:28 2016
Dear Sir,
I would first like to know if your unit has these two certification.
1. SSI Unit registration
2. EM-2
If you have these one can file a case as per the Arbitration act read with MSMED act. If you have any further queries you can contact us.
Saurendra Rautray
Rautray & Co
www.rautray.com
09437008255
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Late payment of SMEs
RK Bhatia | Wed Apr 27 09:51:33 2016
If you owe Rs.100 to mobile company or to a bank, your name will appear in Cibil. But there are large corporates/govts who delay payments infinitely, there is no law to declare them as defaulters. I think it is time SMEs should form association and create such platform, where name of specific corporates should be written whose payments are not received within 30 days of agreed timeline. It will also give information to the other players in the industry. Govt act MSMED is toothless. Unless special courts are formulated to deal with SME payments, there is not going to be any remedy. Delayed payment force SMEs to shut their shops and all efforts of govt go in vain to generate more jobs or more business.
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Re: Late payment of SMEs
Er.(Dr.) D S TOMAR | Wed Sep 7 08:06:41 2016
There is no need for any forum or association to resolve such issues. RBI sould issue a circular to all banks to publish such data as on 10th of every month for irregular paymasters/defaulters.Once getting no response start recovery action that also time bound.In case bank management favours some it should be exposed through such publications.We need such system for recovery.Why Govt/RBI is not acting is more important.Why political pressure is being yield by empowered officials?
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Late Payment by Large Corporates
RV | Sat Dec 5 12:47:57 2015
I strongly support this article. Late payment/no payment is definitely a menace and an unethical business practice by Indian corp orates and business houses. Large corporations levy a penalty on late delivery but there is no strong law to protect the small business from this menace of late payment. Like all fields there is no fear of law and no sanctity of the clauses given in the quote.I am a startup, an MSME. My very first order I haven't received my payment even after 90 days of delivery of goods. Doing business in India is never easy. This epidemic will kill all the startups and small companies. What is the use of "Make in India","Standup India" ?
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Re: Late Payment by Large Corporates
Saurendra | Sun Sep 4 15:38:34 2016
Dear Sir,
MSMED Act can take care of such a menace. It should have be faster but atlas its faster the normal civil case.
I would first like to know if your unit has these two certification. 1. SSI Unit registration 2. EM-2 If you have these one can file a case as per the Arbitration act read with MSMED act. If you have any further queries you can contact us.
Saurendra Rautray
Rautray & Co
www.rautray.com
09437008255
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DELAYED PAYMENT
PUSHPENDRA | Wed Oct 14 13:00:47 2015
IN APRIL I HAD SUPPLIED MATERIAL TO MSME UNIT AND EVEN I GOT REGISTERED UNDER MSME IN JULY OR AUGUST SO NOW CAN I FILE CASE FOR DELAYED AS ITS OCT AND STILL PART PAYMENT HAS BEEN RECEIVED
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Re: DELAYED PAYMENT
saurendra rautray | Thu Dec 10 06:47:13 2015
Hi,
You have put up a valid point. The law is not clear about this kind situation. But there is a chance that you can file the same and you could be successful also.
Regards
Saurendra Rautray
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Late payments to factoring companies by customers
srinivasa rao | Thu Aug 27 00:33:51 2015
Based on the assurance given by the customers we discount their bills, if they fail to make payments on due dates, can we update their name in CIBIL
late payments to MSMEs
Prakash Yadav | Tue May 5 13:37:49 2015
i m aggrieved by delayed payment by Bank of India.i feel law MSME act 2006 is a remarkable remedy but a toothless because of wrong handling by judiciary.i m fighting for last eight yrs.No step of opponents r legal but they've bin able to delay payment for eight years till now & could b much more. The judiciary should be trained as regards, limitation which is only 97 days as per MSME R/W MMSEFCR 2007, no appeal unless 75% is paid to supplier,appeal should b permissible only u/s 34(2) a, b & (3) of the ACA 1996, no 2nd appeal,no legal interference once attachment orders in execution proceedings are issued, etc. The courts still get carried by the might of big cos.,& r misled by Ld legal Sr. counsels who r highly paid by the big cos.,who frustrate the suppliers by delaying tactics in the court by illegal interim orders,even the apex court refuses to intervene in interim orders of HC.i may b winner in d end, but the loss due to enormous delay, closure of business,heavy borrowings at exorbitant rates, sufferings due to sale of properties, family gold for survival, depriving family from school expenses, kirana bills, hospitalization,faltering of commitments/statutory payments and further blacklisting thereby is just unbearable. i even thought of committing suicide several times but since that would push my lenders or creditors into further problems i'm surviving.But believe me with all my honesty that despite the law 1st generation entrepreneurs has 2 suffer & some efforts to implement the provision of act
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Re: late payments to MSMEs
Saurendra Rautray | Sun Sep 4 15:32:55 2016
Hi,
Just want to know if you case is still going on. I have dealt with a matter which got over after 22 years. Do let me know your status . Just curious and may be can guide you too.
Saurendra Rautray
Rautray & Co
www.rautray.com
09437008255
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Late payment
Kumar Jyothi. | Mon Apr 20 03:29:16 2015
Late payment is a menace in the business. Big or small company, including govt. organisations delay payment. All transactions should be through bank / letter of credit, some body should regulate the payment.
Some companies deliberately delay payments, small companies are at the mercy of Bus operators which are run by mafia, they don't pay to small workshops. I would like to know who will control these mafias.
MSME Late Payments
IxCFO Services P.Ltd. | Sun Apr 19 13:33:01 2015
Suggestions : All late payments should be treated on par with defaults like TDS, PF and liable to work out the interest to be paid every quarter. Interest collected by Government should be pooled together to create credit scheme for SME
Late payment
Ms Joshi | Wed Apr 15 04:26:30 2015
Well expressed article. Other woes include 1.inviting quotations for a particular quantity either directly or through bidding, but placing order for a much smaller quantity & on questioning, saying verbally that they will place the balance qty order shortly which never comes.2. Mal/unethical practices of cancelling the order in the process of schedule on vague quality grounds mentioned verbally on repeated follow ups for reason of cancelling balance order. 3. some large Cos even say their state payment terms for SSI is different from other states.
Late payment by powerful big companies to small ones
Kailash Chatterjee | Mon Mar 23 11:47:05 2015
We are a small company doing labour intensive work for our clients. One of our clients M/s. Hindustan Dorr Oliver has not made a payment that was due 4 months ago.. And they laugh in our face knowing fully well that there is nothing we can do about it.. What does my government do to protect me and millions like me from such shark companies? Where is the much hyped good governance if jungle law where might is right is the order of the day in industry?
Late Payments to SMEs
RK BHATIA | Fri Mar 13 14:23:13 2015
I think there should be CIBIL type plateform available to SMEs in which SMEs should be authorised to enlist those companies which default on timely payment. It will high light as to how big corporates befool /exploit SMEs and delay their payments on one or other pretext.
Late payment: RBI move not enough for SMEs
R SHAILLESH RAO | Thu Feb 26 18:08:34 2015
Govt can pass a legislation making it mandatory for every Corporate company, PSU etc to guarantee interest on late payment @ charged by Excise department. Any company not paying interest along with bill settlement will be liable to pay 3 times the interest if claimed by customer. Head of the MSMED department in the city should be given power to necessary steps to recover the dues if the company does not pay the interest.
Move will help in increasing the growth rate
Satya jeet singh | Sat Nov 22 12:59:08 2014
Government move to secure the SMEs payment will help in increasing the economy and growth rate since SME will blossom if they get their payment on time.
ONE STEP TOWARDS MSME DELAYED PAYMENT
SAVEMSMEUNIT | Mon Oct 20 15:04:25 2014
MSME’s unit contribute major portion of India GDP & Manufacturing output and exports country without any support from government. The most crucial is Delayed payments. The small firms find it very difficult to recover their dues from co. like M/s Titagarh Wagon Ltd & even govt. departments due to complex payment procedure & corruption.
Large firms force them to offer long credit period & ask for ABG & security deposit to ensure supply of materials. MSME unit depends on Bank finance & if MSME borrower is unable to service his loan for more than 90 days, his entire loan is recalled, recovery action is initiated either through the Debt Recovery Tribunal or through the SARFAESI Act.
Big Corporate e.g. Umesh Choudhary MD of M/s Titagarh Wagon Ltd does not make payment to the SSI unit & even hire the muscle Power, Advocate, Senior Advocate, High Court upto Supreme Court as a Instrument to eat Small Industries payment and other means to heldup / eat the payment of Small Industries by utilizing their money power.
MSME Act 2006 has made for delayed payments the person like Umesh Choudhary MD of M/s Titagarh Wagon Ltd. It’s nothing but the WHITE ELEPHANT because large company manages to take stay order from High Court.
Small Industries are overlooked & KNOWINGLY KILL or DESTROY in his own country in many ways and not allow them to grow, E.g. the most of the TALENT in our country has gone to other country to avail the opportunity & they are successful in EVERY FIELD.
Sec19 of MSMED Act
SRINIVAS | Fri Sep 5 09:58:39 2014
Dear SME friends and fraternity Greetings!
Approximately 1000 cases are decided for past 8 years of MSMED act. Around 350 cases are lying in different high courts pending due to 75% deposit under Sec.19.
Sec.18 & Sec.19 of MSMED Act to be read with Sec.5 , Sec.2(4), Sec 34(3) of Arbitration and Conciliation Act 1996 to give full effect of legislator intent to provide the remedy under Delayed payment provisions at Chapter V of MSMED act.
Unfortunately supreme court has not interpreted the statute the manner mischief can be suppressed. When Supreme court interprets the above provisions together to extend the remedy and suppress the mischief 50% of SME problem is solved.
I am a Bangalore SME.I have accumulated six cases and in search of some cases to file a PIL or SLP in this regard.
Request you to note that being SME we can engage only small advocate and they do not like us because we are not paymasters. Senior advocates do not like us because we cannot give continuous business and pay well. Many a times our small advocate will turn out to be Junior of opposite side Senior and also many times lacks confidence and knowledge. Unless Sr. Advocate argues the bench will not listen to us seriously apart from high handed buyers pressure on Judiciary directly or indirectly. It will not be possible for us to kill the nexus between Sr. Advocates and Judiciary being small.
In nutshell unless the problem is visibly presented through media SME do not have remedy.
Delayed Payment
Saurendra Rautray | Wed Jun 4 07:07:27 2014
Dear Sir,
There has been an opinion from people that MSMED Act 2009 is toothless. I do not agree with that at all. Imagine if this act was not in existences, then the only way out for SSI Units was to file Money Suit in the Civil court. Which is not only a time taking process but also a financial burden to the Units. At least we have MSMED Act and yes in few states it takes more than 90 days and we have conducted cases in different states like Chhattisgarh, Maharashtra, Orissa, West Bengal and there we have managed to get our cases disposed of within 90 days. In certain circumstance, some cases get disposed off beyond 90 days depending of the facts and situation. But these cases are disposed of in 2 years, which is less than fighting a civil cases. The time period for filing section 34 against the award and then on to High Court and Supreme Court is far less than the normal procedure. Hence I still feel MSMED Act Read with Arbitration Act can still tackle the problem of delayed payment to a large extent. One should require to get a good Advocate who is well versed with this Subject. I request all manufacturing unit to use the Act which is a beneficial Act for the SSI Units.
Saurendra Rautray
Advocate Rautray & Co (New Delhi)
Mobile-09437008255
www.Rautray.com
Late Payment or no payment from Sundry Debtors.
Karanjit Chadha | Wed Mar 26 15:21:27 2014
We agree to your point that to do Business we have to give Credit to the Customer and in fact, we also receive our raw materials on Credit from our Suppliers, The problem starts when the payment from the debtors are not received in time resulting our Bad Payment to our Creditors, Or fund blockage, We will appreciate if the New Govt. submits a bill to solve this problem and we hope that every sector of Business people will appreciate it.
late payments
manoj taori | Wed Dec 11 11:32:15 2013
very good informetion
Late payment: RBI move not enough for SMEs
Sam De | Wed Dec 11 10:31:27 2013
In the USA, we have seen cos placing Lien from the courts very quickly on the assets of the customer, if the payments were not done within time. Being in the Telecom business, one of our subcontractors, took out a Lien on the Tower assets of T Mobile in Chicago, within 15 days of not getting paid at the end of a 30 day term. We had a prime contract through Nokia who in turn had a contract with T Mobile. As we were waiting to get paid from Nokia, this happened in the meanwhile, and T Mobile frantically settled our bills on an urgent basis.
Late payments / credit policy
Sridhar | Sat Dec 7 07:22:28 2013
It is a very important for the state and central government to introduce policy to resolve late payment issues and safe guard snot only SMEs but vendors/suppliers at all levels. There should not be any requirement of customers signing legal agreement for payment terms but the government shall consider Purchase order itself for legal proceedings.
Vijay Goyal Raipur | Wed Dec 4 04:33:17 2013
All the credit rating agency have to make rating grievances cell and any complaint about payment and ask for delay payment they have to upload in their credit rating report .As the loan above Rs 5 cr have mandatory to take credit rating
Late payments
Dilip Jhaveri | Tue Dec 3 15:36:02 2013
One simple solution is to get post dated check to cover the shipments. The problem is most such checks are worthless for insufficient balances. The customer still sell the purchase and pockets the revenue and does not pay the vendor. RBI should have strict policies on bounced checks. Bad checks must be resolved in a month or two and punishment should be sever enough, like in USA, to discourage writing bad checks.
Well if we had a quick and efficient legal system, many problems can be prevented and resolved efficiently.
MSMED ACT 2006
Manohar Shetty | Mon Dec 2 09:32:44 2013
The above act was supposed to be a game changer but like always the implementation is lacking . The only way forward is to ensure that the Auditors of the company are made responsible to ensure that all payments to SME's are made within 45 days and the same should have got cleared in the bank .Mr Anil has very well laid out the bare facts of our Govt owned PSU's as to how the SME's are squeezed and made to borrow more from the bank. Some companies have sought to know as to how much Over Draft/CC limit the SME enjoys with his banker . RBI and the Central Govt only provide lip service to the issues faced by SME's eventhough we are responsible for 45% of all manufacturing and 40% of all exports .
NO Adherence to agreed credit terms by large copanies
Bhagawath Prasad | Sun Dec 1 16:48:08 2013
Although legislations are made at central , unfortunately , enforcement of law is completely missing , It's true that most of large companies do not adhere to agreed terms of payment , primarily due to complicated bill processing systems kept within their Organization , these are kept only to have checks on their own staff , ofcourse to some extent external audit purpose as well, Usually , user department finds suppliers , raises PR to procurement departments , they in turn float coat request, once quotes received , they would call finance , material and accounts departments for negotiations , vendor goes into Chakravyuh like Veerabhmanyu to fight all of them alone, if price is not agreed by him , there is always a threat of delayed payment for previous supplies, therefore he agrees to supply at cost price , after two weeks he is again back for new negotiations , while last supplies went into their bill processing department , Vendor continues to breath until Bank OD and raw material supplier support remains , once it gets locked he is breathless and gets hospitalised, while banks , suppliers and tax authorities start recovery process from him ,delayed payment and no-payment is quite high in companies those that are born before 1980 , in my opinion , instead of Credit guarantee schemes , regulatory body should enforce 60% advance payment alongwith PO by buyer for SMEs , this would help government , banks and other connected issues.
No cash credit loan being provided under CGTSME by the banks.
Pawan | Sun Dec 1 02:46:10 2013
Whenever approaching the bank for a collateral free cash credit loan as i need it for working capital, no one like bothers. Only if you can give collateral then only they are interested in you. Also no bank told me about this scheme, i myself came to know about it from the internet.
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Re: No cash credit loan being provided under CGTSME by the banks.
A. Chackerbutty | Mon Mar 24 11:59:41 2014
You can get cash credit against CGTMSE. You have to ask the bank to transfer your loan to CGTMSE and if your account is standard rating as per bank norms they have o cover you under the scheme. But the cost is quite high. 0.75% of the loan amount is insurance premium. which amounts to about 75,000/- per year for 1 crore benefit.
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Delayed receivables & negleince towards smes.
Kiran N Mahajan. | Fri Nov 29 08:48:21 2013
I do not understand why electricity tarrifs are so varied in different state & why there is no control over same by Maharashtra govt. Whether govt people are unknown to the situation that small enterpreuner runs his manufacturing unit not only for himself but for labours also ? wheather they are not aware of unemployment will grow if the small scale units fail to run ? Atleast they should be aware of the revenues they are getting from smes. When there is strong recession how electricity rates can increase? We have heard of jizia taxesion of Aourangzeb . MAHARASHTRA GOVT does not understand anything ? Wheather it has become breakless vehicle/ uncontrolled by drunken driver ? Only RBI guidelines can not change situation. Everybody including govt officials / civil people & ministers must realise what dicipline is. One must realise that exorbitant incomes we get we are not going to take along with us after death. I am always surprised for the people who make thousands of multi crore ghaphalas/scams.
Delayed payment to SME sector.
Anil Supanekar | Thu Nov 28 16:33:01 2013
Extending credit to large corporate buyers is normally an outcome of bargaining power of individual party. However the case in respect of Govt contract is totally different. It is presumed that unless there is budgetary provision purchase process can not be even initiated. When tenders are floated normally Earnest Money Deposits are taken from the bidders. When Supply Order is placed on successful bidder, Security Deposit is required to be paid towards quality of goods/services as per terms of the contract. It is very interesting to note that Govt contract imposes various bindings on supplier but nowhere it commits itself for timely payment of dues even after supplier has fulfilled his obligations.Nor it mentions any compensation if payment is delayed even after supplier has fulfilled his obligations. It is normally the experience that supplier does not get back the money paid as Earnest Money or Security Deposit ,mostly for the reasons every body in the trade knows.
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Re: Delayed payment to SME sector.
Dilip | Tue Dec 3 15:38:39 2013
We have a system to get paid by the government, "corruption". You pay the bounty and you get paid.
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Re: Delayed payment to SME sector.
Vijay Goyal Raipur | Wed Dec 4 04:15:04 2013
If not paid in due time their should be inbuilt binding to pay late payment at@18% after due date. its is responsibility of purchaser to pay like RTGS as if RTGS is not credited within T 2 Hours bank have to credit the interest @bank rate 2% penalty to the beneficiary account. as an when this law come in force now these days RTGS is credited in real time.
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Form a cartel to not supply goods to late payers
Farheen | Thu Nov 28 09:58:39 2013
I agree that this is a very problematic area of concern that needs to be addressed. I have often toyed with the idea of a website where all SMEs can rate large MNCs etc on their payment terms and form a cartel to not supply goods to a particular concern if they have unnecessarily held up other members payments.
Late Payment by Creditors
A. K. Motashaw | Thu Nov 28 07:52:06 2013
SME are squeezed to the extent of collapsing; along with years of labour & thousands of families. A LAW MUST ENFORCE DELAY INTEREST / PENALTY, NEGATIVE CIBIL RATING OF SUPPLIERS, CRIMINAL ACTION LIKE BOUNCED CHEQUES.
Rs.5,000-crore liquidity support package
SHAILESH | Thu Nov 28 03:33:57 2013
Ultimately the defaulters("large corporate, PSU and gov dep" ) will again take benefit at the cost victims rather a policy is needed that clearly makes it mandatory on ("large corporate, PSU and gov dep" )to pay payment with 18% penal interest in case of delay and penalty of minimum Rs1000/- / Rs100/- per day which ever is more as well
Violation of credit terms
S.K.Butta | Wed Nov 27 16:57:50 2013
My views on this subject are as under;
1.Violation of credit period as mentioned in the purchase order should automatically add interest on overdue period;
2.The buyer should be barred from buying the same material from other supplier.
the above two rules will help the SME to a great extent.
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Re: Violation of credit terms
Vijay Goyal Raipur | Wed Dec 4 04:21:04 2013
If any supply complaint in MSEM help desk that the buyer is not paid payment to supplier in due time than Till the compensation @18% for delayed period buyer pay and remove his name from MSME hep desk to supplier will give material to that buyer. This is maintained through web site or credit rating agency. by doing this responsibility of credit rating agency will also start and also make them accountable.
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Our SSI unit at the verge of closure due to this
S.K.Dutta | Wed Nov 27 10:55:04 2013
Our company , an SME and NSIC approved manufacturing unit are in tremendous financial crisis due to this reason. The outstanding payment from large company are as follows:
1. One steel company 43..0 LAKH SINCE APRIL 2012
2. another METALLURGICAL company 100 LAKH SINCE 1ST JANUARY 2013.
The aforesaid payments are delayed unnecessarily, even though the materials are supplied as per terms of order. There is no proper law of the land to take care of this.Interest accrued against non payment is a crime. What happens if Income tax and interest due is not paid on time? Are we not Indian subject? The days of big talks are over, we really want serious action.
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You can file the petition
Jacob T. Mathew | Thu Nov 28 06:32:57 2013
Hi
You can file the petition before the concerned Officer empowered under the Delayed Payment Act 2009. Generally it would be an IAS Officer in the Industries Dpt of teh state. The said office has Judicial powers and the defaulter can approach the High Court ONLY after depositing the 75% of the Awarded Amount. This order would be applicable to all buyers including Pvt and Public sector companies and Government departments and agencies.
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Re: Our SSI unit at the verge of closure due to this
A. Chackerbutty | Mon Mar 24 12:01:51 2014
File the petition to MSME facilitation centre and then file winding up case - delayed payment act may not help you much.
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Re: Our SSI unit at the verge of closure due to this
Kalyan Jena | Sun Dec 7 21:05:56 2014
Dear Sir,
Kindly contact Saurendra for matter regarding delay payment. 07042664338 - He is advocate who dealt my matter from claiming the amount before the Arbitral Tribunal till supreme court. 09437055999
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Re: Re: Our SSI unit at the verge of closure due to this
RT DK | Mon Jun 22 10:39:52 2015
Hi, can u Pls confirm where is he located and is he reasonable? I have a similar issue with a big corporate. Looking for a good but reasonable lawyer. If poss pls email me on umangclothingco@gmail.com. Thanks
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Make it mandatory to use Domestic Letter of Credit
Manish Chhabra | Wed Nov 27 09:11:48 2013
RBI could make it mandatory to use Domestic Letter of Credit (like a Foreign LC) for any transactions above Rs. 50,000. This could be a simplified and an online system could be developed for ease. This way, open payments will not be allowed, and hence B2B payment transfer delays will be finished totally. Initially it may kill sales and money cycle in the economy, but then once the correction is achieved, things will start falling in place immediately. But, this will have to be a far more simplified system than the foreign LC system looking at the huge volumes.
Late payment: RBI move not enough for SMEs
S K Sureka | Wed Nov 27 08:35:58 2013
Understand that there is specific provision under MSMED Act 2006 that every company has to voluntarily declare the instances of delayed payments in their Annual Report and the Statutory Auditors are supposed to issue qualifying remarks to this effect in the audit report?
Whether this is being followed?
If not, who is to ensure that the Act is abided by all concerned?
With regards
Any delay beyond 30 days should be considered as late payment
R SHAILESH RAO, 9390032403 | Wed Nov 27 08:11:48 2013
Dear Mr. Bikky,
The article is apt and is a major issue with all SMEs. To rectify this malady, I suggest that Govt should make it mandatory for all big companies in Public, Govt and Pvt sector to mention in their Purchase order interest @ bank rate, for late payment. Any delay beyond 30 days of supply should be considered as late payment. It should be made a criminal offence for non payment of late payment interest and filing of FIR under section 420 and any other relevant section should be possible against the management of the company. The company should be allowed to deduct the interest amount from the salary of officer concerned in case the delay was because of the officer. This will curb corruption too.
Charge stiff interest to defaulting industry
Amal Shah | Wed Nov 27 07:08:35 2013
Absolutely agreed - the RBI should immediately charge a stiff penal interest to the defaulting industry. Flimsy and unreal excuses for delaying payment should be unacceptable. Timely payment must be part of audit report and Penal interest should be compulsory and the document must be part of audit report.
The interest payment must be made directly to the suppliers bank for onward credit to supplier. It is only when this happens automatically that SME will not be threatened with a "we will change supplier" threat by the large industry.
Late payment to SMEs by large corps
Ramamurty | Wed Nov 27 06:56:05 2013
Large corporates should compulsorily declare payment delays beyond 45days. The corporates credit rating should be downgraded and all financial institutions should charge them higher interest SMEs should be directly contacted and assured of action. Unfortunately SMEs can't make any complaint as they are dependent on large corps for their business.
Painkiller given without knowing the core issue
Rakesh Raushan | Wed Nov 27 06:20:45 2013
Again this is not a right move by our regulator. This should have addressed core problem. In most of the cases we think that there are many problems (undesirable effects); but if we analysis we will see there are very few UDEs responsible for many problems.
Associations should take strict step for their members
Vijay S | Wed Nov 27 05:18:10 2013
It is very much necessary for the associations to come forward. It is the right time to make these strict changes to help SME over come these issues. This would help them concentrate on business and grow as a company. Even Transport sector should be given such move as they are the one who suffer a lot on late payment or no payment from their clients.
Credit Policy similar to L/c
Sumit Goel | Wed Nov 27 05:07:56 2013
Credit policy in should be similar one as in the case of Exports & import against Bank L/c
Credit shouldn't be legally allowed
Anil Kaul 9967650065/9619493444 | Wed Nov 27 04:52:27 2013
In fact except bankers' credit no other credit transaction should be legally allowed in the country. The buyer must be able to get bank credit freely to buy product/services as required in the business the buyer is dealing in.
It may seem to be impractical but in any case, Govt/RBI steps in and comes to the rescue of trade as in this case, but such moves are post facto and too late affecting business environment adversely by the time relief by the central bank/govt is brought into the system.
Anil Kaul 9967650065/9619493444
Law must be stricter
Viraj Shha | Wed Nov 27 04:50:45 2013
This is a favorable move. But need to have the Late Payments / delayed payments Acts to be more strict and result oriented.
When you approach banks they insist on 200% security
J. Chandrasekaran | Wed Nov 27 04:18:21 2013
RBI has advised extending export credit by scheduled commercial banks. But when you approach the banks they insist on 200% security. If I have 200% security why should I go for borrowing? All Government schemes (which always comes with a sting for officials to extract money), are only on paper and media announcements, nothing practical
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Re: When you approach banks they insist on 200% security
ANIL KAUL 9967650065/9619493444 | Wed Nov 27 05:02:50 2013
This is going on since independence.May be prior to that.
It is possible only when a government with no nonsense appraoch of policy implentation is there at the helm of the affairs dealing with BABUS in most possible punitive way for lack of implementation of government policies.
Secondly,rather most importantly, no discreation should be allowed while making pociies on any subject as lots of discreation at the implenetation level gives opportunity to implementing agancies for adopting nefarious practices thus deafeating the very objective of polices resulting in no improvement at all. ANIL KAUL 9967650065/9619493444
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UK, EU have enacted law, why cannot India?
Jacob T Mathew | Wed Nov 27 03:23:57 2013
Hi,
Late realisation of sales proceeds is the greatest problem faced by SMEs worldwide. US, UK and the EU have enacted legislation and Executive orders to ensure that SMEs do get their dues paid within stipulated time. An article, "How can small businesses take the pain out of late payment" was published by the Guardian Small Business Network has been published. Also refer US President's Exe Office order M-13-15 dt July 11, 2013
and Statutory Instrument 2013 No. 395 of England and Wales dated Mar 16 2013
Based on the above. The Kerala State Small Ind Assn had brought it to the attention of RBI at their Town Hall Meeting held in Cochin.
Collecting money without offending the customers is a herculian task for SMEs in India. Some legislation is essential to make it MANDATORY for the customers of SMEs to pay their SME suppliers within 30-45 days from the date of invoice. The recent enactments in the UK and EU makes in mandatory to the pvt business to pay their small business suppliers within the agreed credit terms and they cannot demand a credit term HIGHER than 60 days. For the Govt buyers the payment has to be made within 30 days.
India too can formulate a legislation/Executive order based on the above.
I can send further data to those who are interested to persue the subject further.
Jacob T. Mathew
Jacob T. Mathew
Mg Dir
Jayvee Computer Services
Trivanrum 695010
jacobmathew205@gmail.com
938781466
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Re: UK, EU have enacted law, why cannot India?
Sam De | Wed Dec 11 10:25:33 2013
Dear mr Mathew,
This is the kind of action which is overdue. Can you advise what can be done in India as because being in the Telecom industry has meant we were facing delays in payments from the top Tower Cos for over 12 - 18 months and their Telecom cos between 6 - 9 months !!!
Pls email: subratade@yahoo.com
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Make mendatory to pay by ECS only
Vijay Goyal Raipur | Wed Nov 27 03:17:19 2013
Government have to make mandatory to pay Bills of SSI,and MSME by all Public Sector unit,Govt.departments, Corporations, state Govt., PSU, or any other company/firm whose turnover is above Rs. 10 crore in a financial year. By way of ECS within 30 days positively from the date of despatch of material. In case of delay interest @18% per annum should make mandatory to pay along with final payment as delay payment and their is no need of debit note for delay payment interest for accounting. and make author responsible for it that the payment has been paid within 30 day or not If not paid they have to make party wise reporting on his report along with reason why payment is not paid in due time.
The problem is deeper than reflected
Siva Sunder | Wed Nov 27 03:05:12 2013
Your article though timely will not help in any way as time and again I have seen such well meaning articles getting published without any meaningful results. What has been mentioned is not even reflecting 10% of the actual malady affecting the SMEs. The problem stems from the initial stage of raw material supply. I will state our own problem which is reflective of the grim situation.
We buy MS Wire Rod from companies like VSP, SAIL. We need to make the complete payment first and then await their material delivery order. At the stockyard it is anybody's secret that the material delivery is at the whims and fancies of the delivery and billing staff. Materials issued will never match the payment leading to pile up of our payments with these companies which will never be refunded if you are a small buyer and will be adjusted against future purchases. Once the finished product is manufactured, credit supplies start with credit period of 60 days on paper which takes at least 90 days to realize. Product pricing is a joke & product costing a bigger one. Price is a prerogative of the buyer, quality the suppliers'. This is a mismatch as if the quality isn't up to buyers expectation, you face rejection. Getting payment will wear out your shoes anyway. The problem now is getting C Forms as we bill at CST2%. Buyers often default on C forms leading to tax burden of 12.5% (nails). Its not business but social service. So what monetary support are we talking about? No characters left to continue.
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Re: The problem is deeper than reflected
Vijay Goyal Raipur | Wed Dec 4 04:27:48 2013
Like TDS certificate To issue C form within 30 day from the end of quarter if not issued then Rs.100perday have to be imposed on buyer by Govt and make mandatory like TDS certificate
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Re: The problem is deeper than reflected
Saurendra Rautray | Wed Jun 4 07:16:43 2014
Non supply of Form c can also be a part of delayed payment and hence a case can be instituted against the buyer. rejection of material if any has to be done within the specified period as mentioned the MSMED Act and not there after.Advocate Saurendra Rautray.
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What about companies shutting down
Anuj Mehta | Wed Nov 27 02:05:20 2013
What about companies shutting down like the Deccan Chronicles - Odyssey Stores? It still owes people a truck load of money!
No rules can end this problem
Bo - Perfectmatch us | Tue Nov 26 20:06:26 2013
No amount of government rules can ever protect business people from making bad credit choices. I do it constantly, but I have learned over the years, and do not hesitate to send bad debt to collection. We also use credit reporting it is screen customers before offering credit. After all, a $1000 order, is only cool if its paid for. My business is in California where is sell b2b products from India.
A serious problem
T P Malik | Tue Nov 26 17:58:50 2013
Late / denied payment is a serious problem. Late / denied payments need to be formed part of the corporate governance. Large organizations need to be made to report delayed / denied payments or small suffering organization may be made to report needs to be deliberated. However, highlighting this factor as part of Corporate Governance must be given due importance to bring awakening.
MSMSED 2006 Act not toothless, implementation is
Ajay Sanghi | Tue Nov 26 17:39:58 2013
I wonder why the MSMSED 2006 Act is toothless? The Act states that a Reference made to the Council shall be disposed off within 45 days. So essentially the spirit is to settle quickly. Once an award is given against the Purchaser for payment of interest at three times the Bank Rate, then the Purchaser needs to deposit 75% of the Award to go into appeal with the High Court.
Some decisions have gone favourably against the Purchasers, mostly PSUs and Govt Undertakings but the process is nowhere near 45 days. The Trade Bodies need to articulate the delays and take them up with the RBI/ Supreme Court. State Governments abet the delay by withholding appointment of the Council Members.
The movement needs to gather velocity and certainty. The Act is an useful tool and needs to be put to proper use.
At least a separate cell to address payment related problems
Narendra Shinde | Tue Nov 26 16:20:30 2013
Dear Sir/Madam;
You have taken up the MOST IMPORTANT question related to any business-either manufacturing or service. Everywhere we have been taught @ customer satisfaction but no one tells @ how to recover money from the customers. Many times the business gets stuck just because of such nonpayments. The GOVT. should lay down some more rules & regulations related to this subject. Right now the rules are available where you have to file a police complaint. It takes lot of time & energy. Even within the existing system, if a separate cell is formed to deal with only payment related problems, it will be a great help for entrepreneurs.
Late payers should be penalised
SJ | Tue Nov 26 16:15:26 2013
The govt should enact a law to make this part of the audit report of the companies. And companies showing higher outstanding to its vendors should be penalised in the form of higher interest rates.
I am a victim - some tough rules should be framed
ALFRED MANOHAR | Tue Nov 26 14:32:56 2013
I am a victim of delay in payments.I started a manufacturing unit manufacturing Electrical stampings and started supplying the same to Bajaj Electricals and then Rallifan who were paying after 6 to 9 months even thought the credit period was 90 days and that too without interest wherein I had to pay penal interest to my bank.I lost everything because of this, now after being declared as NPA now I am restarting after using so much influence my banker has restructured but with interest at 14 to 17%. There is no help for small manufacturers like us.
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Re: I am a victim - some tough rules should be framed
Rakesh Raushan | Wed Nov 27 06:24:59 2013
Dear Mr. Manohar; I am Ex-employee of Bajaj Electricals and responsible for sourcing of materials from vendors for Fans, Appliances and Morphy Richards SBUs. As per my knowledge they have payment terms of 30 days and there is no issue in delay in payment.
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Re: I am a victim - some tough rules should be framed
Saurendra Rautray | Wed Jun 4 07:13:04 2014
Dear Sir,
Kindly seek a service of a good arbitration Lawyer. Things can be sorted out for you. MSMED Act should take care of your delayed payment with huge interest calculated compoundable with monthly rest. Advocate Saurendra Rautray.
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Re: Re: I am a victim - some tough rules should be framed
srinivas | Sat Sep 13 17:39:07 2014
A very wild buyer world out there!
You are right! Most of the times you may have to decide between payment or order!!
Always supply to at least 4 to 5 buyers so that you can be tough with your buyer with out much pain and risk.
Right to RBI and also write to Industries & commerce Commissioner with all data to send a "DO" Letter.
If you want orders do not invoke Sec 15& 16 on your own.
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Re: Re: I am a victim - some tough rules should be framed
savemsmeunit | Mon Oct 20 15:24:13 2014
We are the live example of this. We have supplied a material to company in Year 2012. But they have not made our payment of Rs. 15,97,930/-. This is a very big amount for a MSME unit and finally we become NPA and bankrupt.
We have also taken shelter of MSME Act 2006 to get our payment by filing petition No. 1/2012 dtd. 03.10.2012 but hire Nos. of Advocate right from Calcutta to Delhi and Kanpur and challenged the MSME act 2006 in Calcutta High Court and get stay order with the help of high court judge. We don’t have much funds that we can fight against them to REVOKE stay order and recover our payment from the company.
So, it’s our humble appeal to the Hobl’e Prime Minister, MSME minister, Law Minister and supreme court as well as higher authorities and bureaucrats, Govt. officials and all news channel to help us to get the payment from the company and give us opportunity to survive ourselves.
PLEASE HELP some one.
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